German Market Access for UK-Originated Investment Funds
Investment fund managers domiciled in the United Kingdom (UK) are generally permitted to market in Germany investment funds they manage.
Since the UK withdrew from the European Union in 2021, it is now classified as a third country from the EU's perspective. As a consequence, investment fund managers domiciled in the UK cannot access the investor market through the European passport regime any longer. Instead, they must rely entirely on the German national private placement regime.
Among several other requirements, the German Capital Investment Code stipulates three key requirements for third-country investment fund managers, all of which are fulfilled with regard to the UK. The first, and in the case of the UK most relevant one is the need for an appropriate cooperation arrangement.
An appropriate cooperation arrangement for the purpose of systemic risk oversight and in line with international standards needs to be in place between the German supervisory authority BaFin and the supervisory authority of the third country where the third-country investment fund manager is domiciled and, as far as applicable, the supervisory authority of the third country where the investment fund is domiciled in order to ensure an efficient exchange of information that allows BaFin to carry out its duties under the EU Alternative Investment Fund Managers Directive.
BaFin has signed a respective memorandum of understanding (MoU) with the Bank of England (BoE) and the Financial Conduct Authority (FCA) in April 2019. BaFin has, at the time of writing, also signed such MoU with Australia, Bahamas, Bermuda, Canada, Cayman Islands, Guernsey, Hong Kong, India, Japan, Jersey, South Korea, Singapore, Switzerland and the United States.
Third-country investment fund managers are generally also allowed to market an investment fund in Germany that is not domiciled in the same country as the manager. However, this rule does not apply, if the investment fund shall be marketed to retail investors. In such case, the German Capital Investment Code requires the investment fund and its manager to be domiciled in the same country. It would therefore not be able for a UK manager to market a Jersey investment fund to retail investors in Germany.
Please refer to the Handbook on Marketing Foreign Non-EU/Non-EEA Alternative Investment Funds (AIF) in Germany for more information.
The German law firm Kronsteyn provides legal advise under German investment and investment tax law and, among others, guides investment fund managers through the BaFin marketing notification procedure to ensure compliance with applicable regulations. Please refer to Hendrik Müller-Lankow for any queries.
German National Private Placement Regime (NPPR) provides rules for AIFM not domiciled in EU/EEA that intend to market an AIF in Germany.
Originating loans in Germany generally requires a BaFin license, if the foreign investment manager cannot rely on a specific exemption.
Investment fund managers domiciled outside Germany must comply with specific regulations to market their investment fund in Germany.