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RegCORE Client Alert | German Regulatory Developments
QuickTake
The Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz – FRiG), which entered into force on 16 April 2026, has made many amendments to the German Capital Investment Code (Kapitalanlagegesetzbuch – KAGB), including the mandatory introduction of liquidity management tools for open-ended funds as well as changes to lending by investment funds. In addition, far-reaching changes to the authorisation procedure are being implemented.
In its draft circular “Hinweise zu Änderungen im Kapitalanlagegesetzbuch durch das Fondsrisikobegrenzungsgesetz” (Notes on amendments to the Capital Investment Code through the Fund Risk Limitation Act), submitted for consultation, Bafin examines the above-mentioned amendments to the KAGB in greater detail. In doing so, it provides guidance on how the new rules are to be interpreted. The focus is on questions that market participants have addressed directly to Bafin in this context. Comments on the circular must have reached Bafin by email by 6 July 2026.
The following sets out only the changes to the authorisation procedure in greater detail. It is particularly notable here that Bafin grants grandfathering (Bestandsschutz) in many areas.
Further requirements for senior managers
A central focus of the interpretative guidance is the two newly introduced grounds for refusing authorisation in Sect. 23 No. 2a KAGB.
Sect. 23 No. 2a lit. a) KAGB stipulates that a capital management company (Kapitalverwaltungsgesellschaft – KVG) must employ senior managers (Geschäftsleiter) on a full-time basis.1 In Bafin’s view, in order to meet the requirements set out in the newly inserted provision, in the case of a KVG with only two senior managers both senior managers must each be employed on a full-time basis.2 “Full-time” here means at least 40 hours per week.3 If a KVG has more than two senior managers, individual divisions may also be managed on a part-time basis; however, the total working capacity of all senior managers must correspond to at least two full-time equivalents.4 If the aforementioned requirements are not met, this constitutes an express ground for refusing authorisation.5
In addition, Sect. 23 No. 2a lit. b) KAGB requires that at least two senior managers have their residence in the European Union.6 However, Bafin applies this requirement to existing structures subject to grandfathering.7 For KVGs that already had senior managers prior to the entry into force of the new rules, of whom fewer than two have their residence in the EU, Bafin grants an exemption from this requirement.8 In the case of future changes in management, however, the new requirements of the KAGB must be observed.9
Services and other ancillary services
Bafin clarifies that KVGs will in future be able to apply for certain services under Directive 2014/65/EU (MiFID) individually and independently of one another, see Sect. 20(2) and (3) KAGB.10 Accordingly, portfolio management, investment advice, safekeeping of unit certificates and investment broking can now be obtained on a stand-alone basis in addition to the authorisation for collective portfolio management.11 In Bafin’s view, these activities are no longer merely non-independent ancillary services to portfolio management. As a result, in Bafin’s opinion they must be expressly listed as independent services in an authorisation notice.12
For existing authorisations, Bafin again provides for grandfathering here.14 This means that KVGs which held an authorisation for portfolio management and were thereby also permitted to provide further MiFID services may continue to carry out those activities, even if they are not expressly mentioned in the existing authorisation notice. Bafin justifies this by reference to the affected companies’ reliance on the previously applicable connection (Konnexität) between portfolio management and the further MiFID services.15
Furthermore, in Bafin’s view, other ancillary services that do not constitute authorisation-requiring Mi-FID services need not be expressly named in the authorisation notice.16 This concerns, in particular, certain activities such as the administration of benchmarks under Regulation (EU) 2016/1011 (Benchmark Regulation) or credit services under the Secondary Credit Market Act (Kreditzweitmarktgesetz – KrZwMG).17
In the administration of benchmarks, however, Sect. 20(4) sentence 2 KAGB, as amended by the FRiG, must be observed.18 Under that provision, a KVG may not administer a benchmark that is used in the investment funds it manages itself. Benchmarks that are administered, for example, by other group companies can, in Bafin’s view, in principle continue to be used in the KVG’s investment funds.19 Bafin points out that other general requirements, in particular those regarding the handling of conflicts of interest under Sect. 27 KAGB, remain unaffected.20
Further changes to the authorisation application
It is also new that authorisation applications under Sect. 21(1) and Sect. 22(1) KAGB must in future contain additional information.21 In particular, according to Bafin, further information must be provided on the senior managers, on the business plan, and on outsourcing and sub-outsourcing under Sect. 36 KAGB.22 Here too, however, Bafin assumes grandfathering for existing KVGs.
Footnotes
1. BT-Drs. (Bundestag printed paper) 21/3510, p. 18.
2. Circular 07/2026 (WA), III. 1.1, p. 10.
3. Circular 07/2026 (WA), III. 1.1, p. 10.
4. Circular 07/2026 (WA), III. 1.1, p. 10.
5. Circular 07/2026 (WA), III. 1.1, p. 10.
6. BT-Drs. 21/3510, p. 18.
7. Circular 07/2026 (WA), III. 1.2, p. 10.
8. Circular 07/2026 (WA), III. 1.2, p. 10.
9. Circular 07/2026 (WA), III. 1.2, p. 10.
10. Circular 07/2026 (WA), III. 2.1, p. 11; BT-Drs. 21/3510, pp. 14 f.
11. Circular 07/2026 (WA), III. 2.1, p. 11.
12. Circular 07/2026 (WA), III. 2.1, p. 11.
13. Circular 07/2026 (WA), III. 2.1, p. 11.
14. Circular 07/2026 (WA), III. 2.1, p. 11.
15. Circular 07/2026 (WA), III. 2.2, p. 11.
16. Circular 07/2026 (WA), III. 2.2, p. 11.
17. BT-Drs. 21/3510, p. 15.
18. Circular 07/2026 (WA), III. 2.2, p. 12.
19. Circular 07/2026 (WA), III. 2.2, p. 12.
20. BT-Drs. 21/3510, pp. 16 ff.
21. Circular 07/2026 (WA), III. 3., p. 12.
22. Circular 07/2026 (WA), III. 3., p. 12.
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.
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