The Second Financial Markets Amendment Act (Zweites Finanzmarktnovellierungsgesetz – 2. FiMaNoG) alters the financial market access rules for firms in third countries. In the context of the 2. FiMaNoG, the definition of “third country” refers to jurisdictions outside the EU and “third country firms” refers to entities incorporated outside the EU which seek to do business on a cross-border basis ( i.e. providing services to persons in one jurisdiction from a place of business in another jurisdiction without any establishment in the third country firm’s jurisdiction).
Pursuant to the proposed provision in draft section 80 of the Securities Trading Act (Wertpapierhandelsgesetz – WpHG), the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) will have the regulatory competence to exempt third country firms from an array of requirements such as: disclosure of conflicts of interests, organisational and conduct rules, certain compliance measures, and fit and proper requirements for members of the management board and for sales representatives.
BaFin may grant an exemption to a third country firm, provided its third country legal and supervisory framework has been recognised as equivalent. A precondition for the exemption, according to draft section 80 WpHG, is that the exemption from the licensing requirement has to be granted under draft section 2 para 5 of the German Banking Act (Kreditwesengesetz – KWG). This is material for the applicability of draft section 80 WpHG since cross-border business can only be performed by a third country firm in Germany if a German banking license is not required.
If no exemption is granted by BaFin under draft section 80 WpHG, the third country firm is obliged to comply with the provisions (particularly the organisational and conduct rules) of the WpHG.
In conclusion, the Second Financial Markets Amendment Act provides a detailed set of rules that are designed to harmonise the compliance requirements that third country firms must follow in order for them to be eligible to access the German financial market.