Asset Investment Act (VermAnlG)

Historical development and fundamentals

The German Investment Act came into force on June 1, 2012 and marked a turning point in the regulation of the gray capital market. It was introduced in response to various investor scandals and to improve investor protection. The law replaced the previous regulations of the Sales Prospectus Act for investments not securitized in securities. The last significant amendment was made by Article 12 of the Act of December 11, 2023. The VermAnlG aims to create more transparency and security in the area of non-securitized investments. It regulates the prospectus obligations and information obligations towards investors in detail. The Federal Financial Supervisory Authority (BaFin) has been appointed as the central supervisory authority. The Act closes an important regulatory gap in financial market law. The continuous further development of the law reflects the dynamic changes on the capital market. The regulations have been constantly adapted to new forms of investment and distribution channels. The scope of application has been successively expanded.

Scope of application and definition of investment

The VermAnlG covers various types of investments that are not structured as securities. These include company shares that grant a share in profits as well as trust assets. Participatory loans and subordinated loans also fall under the scope of application. Profit participation rights and registered bonds are also covered by the law. The Act also regulates investments with interest and repayment promises. The regulation of crowdfunding is of particular importance. The definition of investments is deliberately broad in order to prevent circumvention structures. The law applies to all publicly offered investments in Germany. The regulations concern both the issue and the sale of investments. The scope of application has been extended by various amendments to the law.

Obligation to publish a prospectus and information sheet

The central obligation of the VermAnlG is the preparation and publication of a prospectus for publicly offered investments. The prospectus must be approved by BaFin and contain all key information on the investment. In addition, an investment information sheet (VIB) must be prepared, which summarizes the most important information in a compact form. The obligation to publish a prospectus is subject to certain exceptions, particularly for social and charitable projects. The prospectus must contain detailed information on risks, costs and the economic situation of the issuer. The validity of the prospectus is limited in time and must be updated regularly. Advertising for investments is subject to strict requirements. BaFin checks the completeness and consistency of the prospectus information. The law provides for liability regulations for incorrect or missing prospectuses. The prospectus requirement serves to protect investors and ensure market transparency. The prospectus must be written in German.

Supervision and powers of BaFin

BaFin has extensive supervisory and intervention powers under the VermAnlG. It can prohibit the publication of prospectuses and stop public offers. The authority monitors compliance with the prospectus and information requirements. It can request information and carry out inspections of providers. BaFin has the right to prohibit advertising for investments. It can impose fines for violations of the law. The supervisory powers also extend to the ongoing monitoring after issue. BaFin can demand additional information on prospectuses. It publishes measures and decisions imposing fines. The authority cooperates with other national and international supervisory authorities. Its supervisory activities serve to protect the interests of investors. BaFin has far-reaching enforcement powers.

Investor protection and liability

The VermAnlG contains comprehensive regulations to protect investors from risky or dubious offers. Issuers and providers are liable for incorrect or missing prospectuses and information sheets. The law provides for a right of withdrawal for investors. Liability extends to all material information on the investment. Investors can claim damages in the event of incorrect or misleading information. The law stipulates minimum terms and notice periods. The control of the use of funds is intended to prevent misappropriation. Special protective provisions apply to small investors. Liability also covers advertising statements and other sales documents. The limitation periods for liability claims are designed to be investor-friendly. The law provides for various mechanisms to enforce investor rights. The burden of proof lies largely with the provider.

Accounting and transparency

The VermAnlG obliges issuers to provide comprehensive accounting and transparency. Annual financial statements and management reports must be prepared in accordance with strict requirements. The disclosure periods are shorter than under general commercial law. An audit by auditors is mandatory. Issuers must report regularly on business developments. Material changes must be published immediately. The accounts must give a true and fair view. Special requirements apply to the presentation of risks. The transparency obligations also apply after the end of the public offer. Disclosure is made in the Federal Gazette. The accounting regulations serve to inform investors. BaFin monitors compliance with the accounting obligations.

Sanctions and legal consequences

The VermAnlG provides for a differentiated system of sanctions for violations. Criminal provisions apply to serious violations of the law. Fines cover minor violations of information and conduct obligations. Fines can amount to several million euros. Administrative fines can be imposed for breaches of disclosure obligations. BaFin can publish measures and sanctions. Immediate enforcement of administrative acts is possible. The sanctions have both a preventive and repressive effect. The law enables effective enforcement of the regulations. The penal provisions also cover acts of deception towards BaFin. The limitation periods for administrative offenses are reasonably long. Sanctions can also be imposed on responsible persons.