On July 22, 2013, the Act Implementing the Alternative Investment Fund Managers (AIFM) Directive entered into force in Germany. This legislation effectively implements the European Union hedge fund Directive regulating hedge funds and private equity funds in the EU. By virtue of the Act Implementing the AIFM Directive, the Investment Act was repealed and replaced by the Investment Code.). The implementation of the AIFM Directive brings significant administrative burdens and new rules for all German fund providers, noted the German Federal Financial Authority (BAFin)
The Investment Code extends the AIFM Directive on UCITS depositaries. This
concerns in particular the provisions for custody under the strict liability of
the depositary. The legislature was in response to the request of the German
Fund Association (BVI) reinforced by investor protection. The qualification of
sub-custodians are clearly defined, and the liability for the loss of the
sub-custodian of securities is exacerbated.
The legislature has halved the time to examine the distribution indicator
for domestic funds by the BaFin from 40 to 20 days. Thus, the BVI members can more
quickly than originally anticipated sell newly launched mutual funds.
Investment Code regulates both open-end and closed-end funds and the fund
managers.. Regulation on risk management and risk measurement with the use of
derivatives, securities lending and repurchase transactions in investment
companies are covered under the Investment Code.
The Investment Code distinguishes between investment funds, known as the Undertakings
for Collective Investment in Transferable Securities (UCITS), and those that
are considered alternative investment funds, such as hedge funds and private
equity funds. Many stock and bond funds are UCITS. Different registration and
reporting requirements apply to UCITS and hedge funds and other alternative