Inducements and fees; authorisation to issue statutory instruments

(1) An investment services undertaking may not, in connection with the provision of investment services or ancillary investment services, accept inducements from, or grant inducements to, third parties that are not clients of that service or that are not acting on the client's instructions, unless
1. the inducement is designed to enhance the quality of the service provided to the client and does not impair compliance with the investment services undertaking's duty to act in the best interests of the client within the meaning of section 63(1), and
2. the existence, nature and amount of the inducement or, insofar as the amount cannot yet be determined, the manner of its calculation, is disclosed to the client, in a comprehensive, accurate and comprehensible manner, unambiguously and before the provision of the investment service or ancillary investment service. Investment services undertakings must be able to demonstrate that any inducements received or granted by them are designed to enhance the quality of the relevant service for the client. Where an investment services undertaking was not yet able to determine the amount of the inducement and instead disclosed to the client the manner of its calculation, it must subsequently also inform the client of the exact amount of the inducement received or granted. For as long as the investment services undertaking continues to receive inducements in connection with investment services provided for the clients concerned, it must inform its clients, individually, at least once a year, of the actual amount of inducements accepted or granted.
(2) Inducements within the meaning of this provision are commissions, fees or other monetary payments, as well as any non-monetary benefits. The provision of research by third parties to the investment services undertaking does not constitute an inducement where it is provided in return for
1. a direct payment by the investment services undertaking from its own funds, or
2. payments from a separate research payment account controlled by the investment services undertaking, where
a) that account is funded by a specific research charge paid by the client,
b) the investment services undertaking sets a research budget as part of establishing a research account and subjects it to a regular assessment,
c) the investment services undertaking is liable for the research account, and
d) the investment services undertaking regularly assesses the research based on robust quality criteria and their ability to contribute to better investment decisions. The provision of research under the second sentence also does not constitute an inducement where the conditions under subsection (6a), first sentence, numbers 1 to 3, are satisfied. Where an investment services undertaking has established a research account, it must, before providing an investment service, give the client information on the funds allocated for research and the amount of the estimated fees, and must give the client annual information on the total costs incurred by each client for third-party research. For the assessment under the second sentence, number 2, letter d, investment services undertakings must establish written policies covering all necessary elements and provide them to their clients.
(3) Where an investment services undertaking operates a research account, it must, at the request of the client or of the Bundesanstalt, provide a summary comprising:
1. the providers remunerated from a research account within the meaning of subsection (2), second sentence, no. 2,
2. the total amount paid to providers of research over a given period,
3. the benefits and services received by the investment services undertaking, and
4. a comparison of the total amount paid from the research account with the research budget estimated by the undertaking for that period, showing any rebate or carry-over where funds remain in the account.
(4) The disclosure under subsection (1), first sentence, no. 2, and fourth sentence, may, in the case of minor non-monetary benefits, be made in the form of a generic description. Other non-monetary benefits that the investment services undertaking accepts or grants in connection with an investment service or ancillary investment service provided for a client must be stated as to their amount and disclosed separately. Further particulars on the requirements under this subsection, and under subsection (1), first sentence, no. 2, and third and fourth sentences, are laid down in Article 50 of Delegated Regulation (EU) 2017/565; in addition, investment services undertakings must comply with the requirements of section 63(7), third sentence, no. 2.
(5) Where an investment services undertaking is obliged to pay over to the client inducements it receives in connection with the provision of investment services or ancillary investment services, it must inform the client of the relevant procedures.
(6) An investment services undertaking must, for every investment service by which client orders are executed, state separate fees that correspond only to the costs of executing the transaction. The grant of any other benefit, or the provision of any other service, by the same investment services undertaking for another investment services undertaking having its seat in the European Union, is shown with a separately identifiable fee. The grant of another benefit or the provision of another service under the second sentence, and the fees charged for it, may not be influenced by, or made dependent on, the amount of payments for investment services by which client orders are executed.
(6a) By way of derogation from subsection (6), first and second sentences, the provision of research by third parties to investment services undertakings is also permissible without a separate fee being stated for research and for each investment service by which client orders are executed, where
1. an agreement has been reached between the investment services undertaking and the third-party provider of execution services and research, setting out a remuneration method that includes how the total cost of research is taken into account in determining the total cost of the investment services,
2. the investment services undertaking accepting the research
a) informs its clients of its decision to pay for execution services and research separately or jointly,
b) makes available to its clients its policy for paying for research and execution services, including the type of information the investment services undertaking may provide depending on the payment method chosen and, where relevant, information on measures by which the investment services undertaking avoids or manages conflicts of interest potentially arising from joint payment, and
3. the investment services undertaking assesses the research used annually as to its quality, usability and value, and also as to whether the research used can contribute to better investment decisions. Research within the meaning of this subsection is research material and research services relating to one or more financial instruments or other assets, or to the issuers or potential issuers of financial instruments, or research material or services closely related to a particular economic sector or market, such that the research provides the basis for evaluating financial instruments, assets or issuers in that economic sector or market. Research also includes material or services that recommend or suggest an investment strategy and offer a substantiated opinion as to the current or future value or price of such instruments or assets, or otherwise convey analysis and novel insights and draw conclusions, based on new or existing information, that could be used to underpin an investment strategy, and that could be relevant and useful to the decisions the securities institution makes for the clients paying the research fee. Trading commentary and other customised trading advisory services directly connected with the execution of a transaction in financial instruments do not count as research. The investment services undertaking must keep records of the total costs attributable to the third-party research made available to it, insofar as it has knowledge of those costs. This information is made available to the investment firm's clients annually on request.
(6b) The provision of research does not constitute an inducement where the research provider neither provides execution services nor is part of a group that also includes an investment services undertaking offering execution or broking services. In such cases the investment services undertaking must satisfy the requirement under subsection (6a), first sentence, no. 3.
(7) Fees and charges that make the provision of investment services possible in the first place or are necessary for it, and that are not, by their nature, capable of jeopardising compliance with the duty under section 63(1), are excepted from the prohibition under subsection (1).
(8) Further provisions concerning the acceptance of inducements under subsection (1) are laid down in Article 40 of Delegated Regulation (EU) 2017/565.
(9) The Federal Ministry of Finance may, by statutory instrument not requiring the consent of the Bundesrat, adopt further provisions on
1. criteria for the nature and determination of an enhancement of quality within the meaning of subsection (1), first sentence, no. 1,
2. the nature and content of the evidence under subsection (1), second sentence,
3. the nature, content and procedure for levying a research charge, and for setting, administering and using the research budget under subsection (2), second sentence, no. 2, letters a and b,
4. the nature, content and procedure concerning the administration and use of the research account operated by investment services undertakings under subsection (2), no. 2,
5. the nature and content of the written policies under subsection (2), fourth sentence. The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Bundesanstalt.