Applying for a German MiFID authorisation – Lawyer for investment services
Legal advice and representation by German law firm in licence proceedings before BaFin and the Bundesbank.
The provision of services on the financial markets is generally subject to an authorisation requirement. The type, scope and procedure of the licence application to BaFin depend on the specific business model. Accordingly, the WpIG, KWG, ZAG or KAGB may be decisive for the application – in addition, MiCAR, EMIR, MiFIR, CSPR and others may also be relevant. The German law firm Kronsteyn supports you throughout this process.
This contribution provides an overview of the procedure and the key requirements for applying to BaFin for authorisation to provide investment services (e.g. execution of orders on behalf of clients, portfolio management, or investment advice) pursuant to the German Investment Firm Act (WpIG), that insofar implements MiFID.
German lawyer for BaFin authorisation procedures (MiFID)
Applying for authorisation is, depending on the business model, among the most demanding procedures in German financial supervisory law. BaFin and the Bundesbank scrutinise the business model, organisation, capital resources and managing directors in great detail. Even minor inconsistencies in the application documents can lead to queries, delays or, in the worst case, rejection.
As a specialised German law firm in financial markets and supervisory law, Kronsteyn supports the preparation, submission and handling of authorisation applications under the WpIG. We assess whether authorisation is required, prepare and structure the necessary documents (business plan, policies, internal control systems) and manage communications with the supervisory authorities. We also represent your interests comprehensively and efficiently in the case of extensions to existing authorisations.
Kick-off & scoping: Products, target markets, client groups, and delineation from KWG/ZAG/MiCAR.
Governance & capital: Group structure, management functions, outsourcing, capital.
Compliance and client documents: Client T&C, outsourcing agreements, manuals.
Application documents & submission: Drafting/reviewing and filing with BaFin.
Review & authorisation: Handling of inquiries and additional submissions until the formal decision.
Your path to obtaining a German MiFID licence
Services requiring a WpIG Authorisation
The central provision is § 15 WpIG. Investment services, certain ancillary services, and auxiliary activities are subject to prior authorisation by BaFin. Note that the wording of the German provisions differs slightly from the MiFID wording.
Investment services
The following investment services require BaFin authorisation under the WpIG:
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Principal broking services
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Underwriting business
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Investment brokerage
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Investment advice
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Contract broking
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Operation of a multilateral trading facility (MTF)
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Operation of an organised trading facility (OTF)
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Placement business
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Portfolio management
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Proprietary trading
Proprietary business also requires authorisation if conducted alongside one of the services listed above, or if the institution is a member or participant of an MTF/OTF, has direct electronic access to a trading venue, or trades in commodity derivatives, emission allowances or derivatives thereof.
These services relate to financial instruments within the meaning of § 2(5) WpIG, including:
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Shares and comparable instruments
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Capital investments (excluding cooperative shares)
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Debt instruments and similar rights
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Warrants
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Units in investment funds
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Money market instruments
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Foreign currencies or units of account
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Derivatives
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Emission allowances
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Crowdfunding instruments
Ancillary Investment Services
The following ancillary services require BaFin authorisation:
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Custody business
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Granting of securities loans in connection with investment services
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Foreign exchange services related to investment services
Authorisation for custody or lending may only be granted if at least one investment service is also provided.
Auxiliary Activities
The following auxiliary activities also require BaFin authorisation:
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restricted custody business;
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third-country deposit brokerage;
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qualified crypto custody business;
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crypto securities register management.
Authorisation for auxiliary activities is likewise conditional on the provision of at least one investment service.
Which exemptions might apply?
Various exemptions are set out in §§ 3 and 15(5) WpIG, including:
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Intra-group provision of investment services
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Investment advice/brokerage related to specific funds or capital investments
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Investment services relating to commodity derivatives, emission allowances or derivatives thereof as a secondary activity
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Portfolio management for certain closed-ended funds or capital investments
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Activities as a tied agent under a liability umbrella
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Pure proprietary business in certain constellations
Which documents and information must be submitted to BaFin?
The information and documents to be submitted to BaFin and the Deutsche Bundesbank in the course of the licence or authorisation procedure are specified by Delegated Regulation (EU) 2017/1943. These can be divided into the following areas:
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General information
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Information on capital
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Information on shareholders
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Information on managing directors
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Financial information
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Information on corporate organisation
The supervisory authorities require that the information and documents submitted follow specific formats in line with regulatory standards. The forms to be used are set out in § 18 WpI-AnzV. In particular, draft client contracts (general terms and conditions) and client information documents, as well as a draft compliance manual, must be submitted.
The compliance manual is of regular importance to BaFin. It is used to assess how the applicant intends to meet its forthcoming regulatory obligations. For example, the manual must set out in detail which reporting obligations apply to the applicant and how these are to be fulfilled. In addition, the implementation of IT requirements has taken on greater significance since the entry into force of DORA than was the case under BAIT.
As a rule, BaFin and the Bundesbank will raise specific questions during the licence or authorisation procedure, requiring further information and documents to be submitted. Depending on the nature and scope of the business model, one or two rounds of supplementary submissions can typically be expected. Where application documents are of high quality, the extent of such supplementary submissions generally remains limited.
Granting of the licence/authorisation
BaFin will grant the requested licence or authorisation to provide investment services, ancillary investment services and ancillary activities, provided that no grounds for refusal within the meaning of § 18 WpIG exist. Mandatory grounds for refusal include, among others:
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the resources required for business operations, in particular sufficient initial capital, are not available
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a managing director is not reliable
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the holder of a significant participation is not reliable
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a managing director does not have the required professional qualifications
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a managing director does not have sufficient time available
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a managing director does not meet the requirements regarding the number of management and supervisory mandates
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the investment firm does not have its head office and registered office in Germany
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the investment firm is not willing or able to establish the necessary organisational arrangements for the proper conduct of the business for which authorisation is sought
The last refusal ground mentioned above is based on a discretionary assessment of facts by BaFin and the Bundesbank. The quality of the information and documents submitted is also of decisive importance here.
At the end of the procedure, BaFin grants the licence/authorisation by way of a written notice. Only from that point onwards may the requested investment services be provided.
How long does the authorisation procedure take?
The duration of the procedure depends on various factors, in particular the complexity of the business model, the scope of the application, BaFin’s staffing capacity and the quality of the documents submitted. As a rule, BaFin will raise queries requiring the submission of additional information. On average, a timeframe of six to twelve months should be expected.
How much does the authorisation application cost?
The public-law costs of the BaFin licence/authorisation are approximately EUR 8,000. The exact amount depends on the scope of the business model.
Get in touch with us
The German law firm Kronsteyn combines in-depth expertise in financial supervisory law with many years of experience in dealings with BaFin and the Bundesbank. We guide your authorisation procedure under the WpIG efficiently, precisely and with legal certainty. Get in touch – your contact is lawyer Dr Hendrik Müller-Lankow.
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