Special rules of conduct in providing investment advice and financial portfolio management; authorisation to issue statutory instruments

(1) Where an investment services undertaking provides investment advice, it must, in addition to the information under section 63(7), inform the client, in good time before the advice is given and in comprehensible form, 1. whether the investment advice is provided independently (independent fee-based investment advice) or not; 2. whether the investment advice is based on a broad or on a more restricted analysis of different types of financial instrument, in particular whether the range of financial instruments is limited to financial instruments issued or provided by entities having close links with the investment services undertaking, or any other legal or economic relationship with the investment services undertaking so close as to pose a risk of impairing the independence of the advice, and 3. whether the investment services undertaking will provide the client with a periodic assessment of the suitability of the financial instruments recommended. The first sentence applies correspondingly to information under Article 6(2) of Regulation (EU) 2019/2088. Section 63(7), second sentence and, where its conditions are satisfied, the exemption under section 63(8), apply correspondingly.
(2) In the case of investment advice, the investment services undertaking must provide a retail client, in good time before the conclusion of a transaction in financial instruments for which no key information document need be prepared under Regulation (EU) No 1286/2014, with 1. a short and easily comprehensible information sheet on every financial instrument to which a purchase recommendation relates, 2. in the cases of the third sentence, an information sheet referred to in number 1 or, alternatively, a standardised information sheet, or 3. in the cases of the fourth sentence, a document referred to there in place of the information sheet referred to in number 1. The particulars in the information sheets under the first sentence must be neither incorrect nor misleading and must be consistent with the particulars in the prospectus. For shares that, at the time of the investment advice, are traded on a regulated market, a standardised information sheet may be used in place of the information sheet under the first sentence, number 1. The information sheet is replaced by 1. for units or shares in UCITS or open-ended retail AIFs, the key investor information under sections 164 and 166 of the Capital Investment Code, 2. for units or shares in closed-ended retail AIFs, the key investor information under sections 268 and 270 of the Capital Investment Code, 3. for units or shares in special AIFs, the key investor information under section 166 or section 270 of the Capital Investment Code, insofar as the AIF management company has prepared such information under section 307(5) of the Capital Investment Code, 4. for EU AIFs and foreign AIFs, the key investor information under section 318(5) of the Capital Investment Code, 5. for EU UCITS, the key investor information published in German under section 298(1), second sentence of the Capital Investment Code, 6. for domestic collective investment undertakings within the meaning of the Investment Act as in force until 21 July 2013, that may continue to be marketed for the period referred to in section 345(6), first sentence of the Capital Investment Code, the key investor information prepared under section 42(2) of the Investment Act as in force until 21 July 2013, 7. for foreign collective investment undertakings within the meaning of the Investment Act as in force until 21 July 2013, that may continue to be marketed for the period referred to in section 345(8), second sentence, or section 355(2), tenth sentence of the Capital Investment Code, the key investor information prepared under section 137(2) of the Investment Act as in force until 21 July 2013, 8. for investment assets within the meaning of section 1(2) of the Assets Investment Act, the investment assets information sheet under section 13 of the Assets Investment Act, insofar as the offeror of the investment assets is obliged to prepare such an investment assets information sheet, 9. for certified retirement-provision and basic-pension contracts within the meaning of the Retirement Provision Contracts Certification Act, the individual product information sheet under section 7(1) of the Retirement Provision Contracts Certification Act, together with the key investor information under number 1, 3 or number 4, insofar as units in the undertakings for collective investment referred to in number 1, 3 or number 4 are concerned, and 10. for securities within the meaning of section 2, no. 1 of the Securities Prospectus Act, the securities information sheet under section 4 of the Securities Prospectus Act, insofar as the offeror of the securities is obliged to prepare such a securities information sheet.
(3) The investment services undertaking must obtain from a client all information 1. on the client's knowledge and experience in the investment field relevant to transactions in the specific types of financial instrument or investment service, 2. on the client's financial situation, including their ability to bear losses, and 3. on the client's investment objectives, including their risk tolerance, that is necessary to enable it to recommend to the client a financial instrument or investment service that is suitable for the client and, in particular, is in accordance with the client's risk tolerance and ability to bear losses. An investment services undertaking may recommend to its clients only financial instruments and investment services, or carry out transactions in the course of financial portfolio management, that are suitable for the client according to the information obtained. Further provisions on suitability and on the obligations applicable in connection with the assessment of suitability are laid down in Articles 54 and 55 of Delegated Regulation (EU) 2017/565. Further provisions on the suitability of securitisations, and on the obligations applicable in connection with the assessment of suitability, are laid down in Article 3 of Regulation (EU) 2017/2402. Where an investment services undertaking provides investment advice recommending linked products or services within the meaning of section 63(9), the second sentence applies correspondingly to the entire linked transaction. Where investment services undertakings provide investment advice or financial portfolio management that involves the rebalancing of financial instruments, they must obtain the necessary information on the client's investment and analyse the costs and benefits of the rebalancing of financial instruments. The sixth sentence does not apply to services provided to professional clients, unless those clients notify the investment services undertaking, either electronically or in writing, that they wish to exercise the rights conferred by the sixth sentence.
(4) An investment services undertaking that provides investment advice must, before the conclusion of the contract, provide the retail client, on a durable medium, with a statement on the suitability of the recommendation (suitability statement). The suitability statement must specify the advice given and explain how it was tailored to the client's preferences, investment objectives and other characteristics. Further provisions are laid down in Article 54(12) of Delegated Regulation (EU) 2017/565. Where the agreement to buy or sell a financial instrument is concluded by means of a means of distance communication that does not permit the prior transmission of the suitability statement, the investment services undertaking may, exceptionally, provide the suitability statement immediately after the conclusion of the contract, where the client has agreed that the suitability statement be provided without delay after the conclusion of the contract, and the investment services undertaking has offered the client the option of postponing the execution of the transaction so that the client has the opportunity to receive the suitability statement beforehand. In providing investment advice, investment services undertakings must inform the client whether the benefits of a rebalancing of financial instruments outweigh the costs incurred in the rebalancing. The fifth sentence does not apply to services provided to professional clients, unless those clients notify the investment services undertaking, either electronically or in writing, that they wish to exercise the rights conferred by the fifth sentence.
(5) An investment services undertaking that provides independent fee-based investment advice 1. must, in the advice, take into account a sufficiently broad range of financial instruments available on the market that a) are sufficiently diversified with regard to their type and issuers or providers, and b) are not limited to financial instruments issued or offered by the investment services undertaking itself, or by providers or issuers having close links with the investment services undertaking, or otherwise maintaining with it such close legal or economic relationships as to pose a risk to the independence of the advice; 2. may have the independent fee-based investment advice remunerated only by the client. No non-monetary benefits whatsoever may, under the first sentence, number 2, be accepted in connection with independent fee-based investment advice from a third party that is not a client of that service, or that has not been instructed to do so by the client. Monetary benefits may be accepted only where the recommended financial instrument, or an equally suitable financial instrument, is not obtainable without the benefit. In that case the monetary benefits must be paid over to the client, in full, as soon as reasonably possible after receipt. Provisions on the payment of taxes and duties remain unaffected. The investment services undertaking must inform clients of the monetary benefits paid over. In other respects, the general requirements applicable to investment advice apply.
(6) In recommending the conclusion of transactions in financial instruments based on independent fee-based investment advice, where the investment services undertaking is itself the provider or issuer, or has a close link or other economic entanglement with the provider or issuer, the investment services undertaking must inform the client, in good time before the recommendation and in comprehensible form, of 1. the fact that it is itself the provider or issuer of the financial instruments, 2. the existence of a close link or other economic entanglement with the provider or issuer, and 3. the existence of its own profit interest, or of the interest of a provider or issuer linked or economically entangled with it, in the conclusion of the transaction. An investment services undertaking may not execute a transaction based on its independent fee-based investment advice as a transaction with the client for its own account at a fixed or determinable price (fixed-price transaction). Excepted are fixed-price transactions in financial instruments of which the investment services undertaking is itself the provider or issuer.
(7) An investment services undertaking that provides financial portfolio management may not accept and retain, in connection with the financial portfolio management, benefits from third parties or from persons acting for third parties. By way of derogation from the first sentence, non-monetary benefits may be accepted only where they are minor non-monetary benefits 1. capable of enhancing the quality of the investment service and ancillary investment services provided to the client, and 2. that are, having regard to their scale — the total amount of benefits granted by a single undertaking or a single group of undertakings being taken into account — and their nature, reasonable and proportionate and such as not to be judged to impair compliance with the investment services undertaking's duty to act in the best interests of its clients, where those benefits are clearly disclosed to the client before the relevant investment service or ancillary investment service is provided to the client. The disclosure may be made in the form of a generic description. Monetary benefits accepted in connection with financial portfolio management must be paid over to the client, in full, as soon as reasonably possible after receipt. Provisions on the payment of taxes and duties remain unaffected. The investment services undertaking must inform the client of the monetary benefits paid over.
(7a) Where an investment services undertaking provides financial portfolio management, it must, in addition to the information under section 63(7), provide the client, in good time and in comprehensible form, with information under Article 6(1) and Articles 7 to 9 of Regulation (EU) 2019/2088 and under Articles 5 to 7 of Regulation (EU) 2020/852. Section 63(7), second sentence and (8), apply correspondingly.
(8) Where an investment services undertaking provides financial portfolio management, or has informed the client under subsection (1), first sentence, number 3, that it will assess the suitability of the recommended financial instruments periodically, the periodic reports to retail clients under section 63(12) must in particular include a statement of how the investment meets the client's preferences, investment objectives and other characteristics. Where an investment services undertaking provides financial portfolio management, the periodic reports under section 63(12) must also include the explanations and information under Article 11(1) of Regulation (EU) 2019/2088 and under Articles 5 to 7 of Regulation (EU) 2020/852.
(9) Further provisions on subsections (1), (3), (5) and (8) are set out in Delegated Regulation (EU) 2017/565, in particular on 1. the nature, content, presentation and timing of the information required for clients under subsections (1) and (5), including in conjunction with section 63(7), in Articles 52 and 53, 2. suitability under subsection (3), the obligations applicable in connection with the assessment of suitability, and the nature, scope and criteria of the information to be obtained from clients under subsection (3), in Articles 54 and 55, 3. the statement under subsection (4), in Article 54(12), 4. investment advice under subsection (5), in Article 53, 5. the nature, content and timing of the reporting obligations under subsection (8), including in conjunction with section 63(12), in Articles 60 and 62.
(10) The Federal Ministry of Finance may, by statutory instrument not requiring the consent of the Bundesrat, adopt further provisions 1. in agreement with the Federal Ministry of Justice and Consumer Protection, on the content and structure, and on the manner of provision, of the information sheets within the meaning of subsection (2), first sentence, and on the content and structure, and manner of provision, of the standardised information sheet within the meaning of subsection (2), third sentence, 2. on the nature, content presentation, timing and medium of the information required for clients under subsection (6), 3. on criteria for determining when minor non-monetary benefits within the meaning of subsection (7) exist. The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Bundesanstalt.