Germany: Ahead of the Game on the KII

Last Updated: 6 January 2011
Article by Angelo Lercara

There are currently two legislative proposals in Germany that aim to introduce a short, easily readable and understandable document that contains key information for investors in financial instruments: the Key Investor Information Document ("KII") under UCITS IV, and the information leaflet under the draft German Investor Protection Act.

Expedited Implementation of the KII in Germany

The first legislative proposal is based on the so-called UCITS IV Directive, which is more fully discussed in Key Investor Information Document: Friend or Foe? in this Report. The UCITS IV provisions will be implemented in amendments to the German Investment Act. The Committee of European Securities Regulators ("CESR") has agreed on the date of 1 July 2012 as the latest date for the implementation of the KII in all Member States.

The draft amendments to the German law would provide for an earlier implementation of the KII than required by the CESR agreement—UCITS set up in Germany would be required to issue a KII to investors from 1 July 2011, instead of 1 July 2012. However, this expedited requirement relates only to German funds (approved by the Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). The draft amendments also contain a grandfathering clause for non-German UCITS admitted to public distribution in Germany prior to July 2011. These UCITS must provide the BaFin with a KII as soon as a KII is required to be produced under the rules of the relevant home state of the UCITS, and in any event by 30 June 2012.

It is unclear whether the grandfathering clause would also be applicable to UCITS currently in existence that are registered for public distribution in Germany after 1 July 2011; the draft amendments do not explicitly address this situation. In our opinion, the grandfathering provision should also be available for such UCITS, since the German Investment Act cannot require supervisory authorities in other EU countries to approve KIIs before the relevant home state rules would impose such an obligation.

The Information Leaflet Under the Draft German Investor Protection Act

Under a separate legislative initiative, the German Ministry of Finance has published a draft Act to strengthen investor protection and improve capital market efficiency. The German Investor Protection Act would introduce, among other requirements, the obligation for intermediaries deemed to be investment services firms to provide retail clients with a short and easy to understand information leaflet (Informationsblatt) before a transaction is concluded and where investment advice is provided. According to the draft, if the financial instruments that are subject of the investment advice are shares of a UCITS, the information leaflet may be replaced (the draft act says "substituted"—("tritt an die Stelle") by the KII.

The information leaflet will be introduced by an amendment of section 31 of the German Securities Trading Act (Wertpapierhandelsgesetz, the "WpHG") that contains the general code of conduct rules for investment services firms.1

As discussed above, the obligation to provide the KII would not be imposed until 1 July 2011, at the earliest. Should the Investor Protection Act be enacted before that date, an intermediary that markets German UCITS would need to produce an information leaflet during the period of time between the introduction of the information leaflet and 1 July 2011.

Possible Grandfathering

Currently, the German Ministry of Finance (responsible for drafting both sets of rules discussed above) seems to be of the view that if the information leaflet regime is introduced before 1 July 2011, German UCITS may "ignore" the information leaflet and may continue to use the simplified prospectus until 1 July 2011, when provision of the KII will be mandatory.

The situation is unfortunately unclear for foreign UCITS, and the Ministry of Finance has not yet taken a position on this matter. However, it is likely that foreign UCITS will benefit from the same grandfathering rule and that, until 1 July 2011 such UCITS may use the simplified prospectus instead of the information leaflet.

It is also still unclear whether a foreign UCITS that, according to its home state rules, is not required to produce a KII before 1 July 2012, will be required to produce an information leaflet in Germany from 1 July 2011 or may continue to use its simplified prospectus until 1 July 2012.

Potential Consequences for Foreign UCITS

Distribution Through Exempt Financial Advisors

The Markets in Financial Instruments Directive ("MiFID") includes a provision allowing EU Member States to exempt from the application of MiFID: persons who provide investment services limited to the receipt and transmission of orders for units in collective investment undertakings; and persons who provide investment advice in relation to such financial instruments and who, in the course of providing such advice, are only allowed to transmit orders to certain licensed entities.

Germany is one of the Member States that has made use of this exemption. The German Banking Act provides an exemption from the license requirement under such Act for "Exempt Financial Advisors"— persons that provide investment broking, contract broking and investment advice in respect of funds (such as foreign UCITS) that are registered for public distribution in Germany, provided such person does not receive or hold monies or shares from or for investors.

An Exempt Financial Advisor is not considered to be an investment services firm and therefore is not subject to the provisions of 31 et seq. WpHG. As a consequence, Exempt Financial Advisors will not be subject to the newly introduced requirement to provide retail investors with an information leaflet. However, there has been suggestion that the German government may plan to further regulate Exempt Financial Advisors and that a comparable requirement will be imposed on these advisors to provide an information leaflet in the near future.

Distribution Through Licensed Financial Services Providers

Any other regulated investment services firm will be required to comply with the new rules. As discussed above, the obligation to produce the information leaflet under the WpHG will not be directly applicable to the UCITS. It will be an obligation of the investment services firms acting as intermediaries between the UCITS and the clients. However, it may be anticipated that these German distributors will require the domestic and foreign UCITS to produce such an information leaflet in order to continue distribution.

The Information Leaflet

The information leaflet for non-complex financial instruments, such as (currently still) shares of UCITS, may not be longer than two pages of A4 size. It must contain the essential information regarding the financial instrument, set forth in a clear and coherent manner to enable an investor to judge (and make comparisons to other financial instruments) in a best possible way: the type of financial instrument, its functionality, the risks and costs related thereto, and the chances of a repayment of the capital under different market conditions.

The information leaflet may only relate to one financial instrument, and it must not contain any marketing information nor any information that does not relate to the above-mentioned purpose. It may be made available in electronic format.


As of the date of this publication, it is not foreseeable how the information leaflet obligations will be applied to foreign UCITS that are not required to make a KII available before 1 July 2012. Information in this respect has not been forthcoming from the BaFin or the Ministry of Finance, and it seems the result will depend on the further legislative procedure and the outcome of the relevant hearings.

In a worst case scenario, foreign UCITS would have two potential options:

  • They could produce an information leaflet for the interim period until the KII is available in their home state, which would lead to additional cost and workload uniquely for the German market; or
  • They could ensure that a KII is available in the German language by 1 July 2011. However, under this alternative, the UCITS would not benefit from the grandfathering provided for by the UCITS IV Directive and confirmed by CESR.


1 The obligation to provide an information leaflet would not apply with respect to professional investors as defined in section 31a para. 2 of the WpHG. These generally include, among others: investment services enterprises; authorized or supervised financial institutions; insurance undertakings; collective investment schemes and their management companies; pension funds and their management companies; enterprises whose investment service is solely to provide proprietary business on a German stock exchange or derivatives market; proprietary trading, principal broking services or contract broking on derivatives markets; quotation of prices as market maker on derivatives markets; exchange traders and commodity derivatives dealers; certain other institutional investors; and entities offering the securitization of assets and other financing transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.