Capital Markets Law

Issuers of financial instruments who wish to raise money from a large number of investors on the capital market must regularly prepare and publish an information document in accordance with capital market law. Depending on the issue volume, this may require a securities prospectus. For smaller issue volumes, an issuance can also be made by means of a three to four page securities information document (WIB) or a key information document (KID). With the exception of the key information document, the other documents must be approved by BaFin prior to their publication. There are exceptions to the obligation to prepare an information document in individual cases, for example if only a limited number or only professional investors are to be addressed with a public offer. The information document relevant for the transaction must regularly contain information on the issuer and its business activities. Investors must be informed about the risks associated with an investment in the financial instrument offered. In addition to the possibility of drawing up a capital market prospectus specific to an issuance, issuers who intend to raise money regularly via the capital market can draw up a so-called base prospectus. If such base prospectus has been approved by BaFin, it is possible to carry out drawdowns under the base prospectus and offer financial instruments to the public within a short period of time.

The obligation to prepare a securities prospectus or other information document may also arise if the financial instruments offered are tokenized. BaFin treats tokens as securities if they are transferable, tradable on a financial market and grant rights similar to securities. If these requirements are met, BaFin assumes a tokenized security for whose first public offering on the capital market a securities prospectus must be prepared in accordance with the EU Prospectus Regulation and accordingly be approved by BaFin. No securities prospectus is to be prepared if an exception provided for in the Prospectus Regulation is met. If a token cannot be classified as a security, prospectus obligations may nevertheless be triggered in individual cases under other supervisory regimes under capital market law, such as the German Alternative Investment Act (Vermögensanlagengesetz) or the German Investment Code (Kapitalanlagegesetzbuch). In such cases, the law also provides for exceptions that may lead to an exemption from prospectus requirements for financing projects in individual cases.

If an issuer has decided to prepare a securities information document (WIB) or a key information document (KID) in the context of a small-volume public offering, pursuant to the legal provisions the distribution must be carried out by an investment firm by way of investment advice or investment brokerage. This financial service provider must ensure that the maximum limits provided for in the law that may be invested by an investor are complied with. If on the other hand the issuer uses a full securities prospectus approved by BaFin, it could market the financial instruments offered also on its own. When marketing the financial instruments, care must be taken to ensure that the rules on advertising set out in the law are complied with. For example, an advertisement must refer to the published information document (e.g. the securities prospectus) and must not contradict it in terms of content. If the financial instrument in question is traded on a stock exchange or another trading system, the provisions of the Market Abuse Regulation (MAR), for example on insider trading, may have to be observed.

The competent lawyer for questions regarding capital markets law in our law firm is Attorney Dr. Konrad Uhink.