BaFin statement on treatment of UK exchanges and UK fund distribution

UK exchanges

The German Federal Financial Supervisory Authority (BaFin) has updated its exchange list and announced that the following ten UK exchanges will be included from 1 January 2021 pursuant to Section 193 para 1 sentence 1 no. 2 and 4 of the German Capital Investment Code (Kapitalanlagegesetzbuch - "KAGB"):

• London Stock Exchange,
• NEX Exchange,
• Euronext London,
• Aquis MTF,
• Cboe Europe Equities MTF,
• UBS MTF,
• Turquoise,
• Liquidnet Europe,
• London Stock Exchange Non-AIM MTF
• MarketAxess Europe MTF.

Distribution in Germany

At the end of the UK's transitional period on 31 December 2020, UK funds will no longer be able to be distributed in Germany under the European passport regulations.

For these funds to continue to be marketed in Germany from 1 January 2021, they will each have to file a bilateral third-country distribution notification with the BaFin. On 19 November 2020, the BaFin confirmed that a distribution notification could be submitted ahead of the end of the transitional period so that distribution could continue without interruption.

Currently, UK funds can be marketed in Germany on the basis of passports under

• Section 310 KAGB (Article 93 of the UCITS Directive) for UCITS and

• Section 323 KAGB (Article 32 of AIFMD) for special AIF (alternative investment funds which may only be marketed to professional and semi-professional investors).

If these funds wish to continue to be marketed in Germany after the transitional period expires of the transitional period, they must file a bilateral third-country marketing notification under Article 36 or Article 42 of AIFMD.

With regard to funds which UK managers have already registered for distribution in Germany under Article 36 of AIFMD, BaFin's stance seems to be that managers do not have to re-apply under Article 42 AIFMD and go through a new application procedure. It appears that the funds can, instead, be distributed in Germany on the basis of the previously granted distribution license. However, BaFin has as yet made no official statement on this.