Clients; authorisation to issue statutory instruments

(1) Clients within the meaning of this Act are all natural or legal persons for whom investment services undertakings provide, or seek to provide, investment services or ancillary investment services.
(2) Professional clients within the meaning of this Act are clients who possess sufficient experience, knowledge and expertise to make their own investment decisions and adequately assess the risks involved. Professional clients within the meaning of the first sentence are 1. undertakings that, as a) investment services undertakings, b) other authorised or supervised financial institutions, c) insurance undertakings, d) collective investment undertakings and their management companies, e) pension funds and their management companies, f) exchange traders and commodity derivatives dealers, g) other institutional investors whose main activity is not covered by letters a to f, are required to be authorised or supervised, domestically or abroad, in order to operate on the financial markets; 2. undertakings not required to be authorised or supervised within the meaning of number 1, that exceed at least two of the following three criteria: a) balance-sheet total of EUR 20,000,000, b) net turnover of EUR 40,000,000, c) own funds of EUR 2,000,000; 3. national and regional governments and bodies responsible for public debt management at national or regional level; 4. central banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other comparable international organisations; 5. other institutional investors not required to be authorised or supervised within the meaning of number 1, whose main activity is investing in financial instruments, and entities engaged in the securitisation of assets and other financing transactions. They are regarded as professional clients in relation to all financial instruments, investment services and ancillary investment services.
(3) Retail clients within the meaning of this Act are clients who are not professional clients.
(4) Eligible counterparties are undertakings within the meaning of subsection (2), second sentence, no. 1, letters a to e, and entities under subsection (2), nos. 3 and 4. The following are treated as equivalent to eligible counterparties: 1. undertakings within the meaning of subsection (2), no. 2, whether domestic or foreign, 2. undertakings having their seat in another Member State of the European Union or another state party to the Agreement on the European Economic Area, that are, under the law of their home Member State, regarded as eligible counterparties within the meaning of Article 30(3), first subparagraph of Directive 2014/65/EU, where they have agreed to be treated as an eligible counterparty for all or particular transactions.
(5) A professional client may agree with the investment services undertaking to be classified as a retail client. The agreement on the change of classification requires written form. Where the change is not to apply to all investment services, ancillary investment services and financial instruments, this must be expressly specified. An investment services undertaking must, at the start of a business relationship, inform professional clients within the meaning of subsection (2), second sentence, no. 2, and subsection (6), that they are classified as professional clients and that the classification may be changed under the first sentence. Where an investment services undertaking classified clients before 1 November 2007 within the meaning of subsection (2), first sentence, on the basis of an assessment procedure that took account of the clients' expertise, experience and knowledge, that classification remains valid after 1 November 2007. Those clients must be informed of the conditions for classification under subsections (2) and (5) and of the possibility of changing the classification under subsection (5), fourth sentence.
(6) A retail client may, on application or by determination of the investment services undertaking, be classified as a professional client. The change of classification must be preceded by an assessment by the investment services undertaking of whether the client is, on account of their experience, knowledge and expertise, capable, generally or for a particular type of transaction, of making an investment decision and of adequately assessing the risks involved. A change of classification comes into consideration only where the retail client satisfies at least two of the following three criteria: 1. the client has, on the market on which the financial instruments in respect of which they are to be classified as a professional client are traded, carried out an average of ten transactions of significant size per quarter over the past year; 2. the client has bank deposits and financial instruments worth more than EUR 500,000; 3. the client has worked in a profession in the capital markets sector for at least one year, that requires knowledge of the transactions, investment services and ancillary investment services in question. The investment services undertaking must inform the retail client in writing that, with the change of classification, the protective provisions of this Act applicable to retail clients no longer apply. The client must confirm in writing that they have taken note of this notice. Where a professional client within the meaning of the first sentence or of subsection (2), second sentence, no. 2, does not inform the investment services undertaking of all changes that could affect their classification as a professional client, an incorrect classification resulting from this does not constitute a breach of duty by the investment services undertaking.
(7) The Federal Ministry of Finance may, by statutory instrument not requiring the consent of the Bundesrat, adopt further provisions on the requirements for a classification under subsection (2), second sentence, no. 2, and on the criteria, procedure and organisational arrangements for a change or retention of classification under subsections (5) and (6). The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Bundesanstalt.