New audit and notification requirements for German investment firms

On 11 December 2023, the German Notification Ordinance (Wertpapierinstituts-Anzeigenverordnung – WpI-AnzV; please click here) and the German Audit Report Ordinance (Wertpapierinstituts-Prüfungsberichtsverordnung – WpI-PrüfbV; please click here) were published in the German Federal Law Gazette. Both ordinances came into force on 12 December 2023 with no transition period.

WpI-AnzV and WpI-PrüfbV were published for consultation on 4 May 2021. During the substantial period that passed between the consultation and the entry into force, several changes were made.

New notification requirements

The key elements of the WpI-AnzV are as follows: The specification of obligations for investment firms regarding the submission of notifications and documents. More specifically:

• The notifications and documents required to be submitted by in-scope firms under the German Securities Institutions Act (Wertpapierhandelsgesetz – WpIG), Commission Delegated Regulation (EU) 2017/194 or the Commission Implementing Regulation (EU) 2017/1945 have to be filed with the BaFin or the German Federal Bank (BBank).
• In-scope firms are required to notify the intention, execution and material changes in the context of outsourcing. Therefore, the in-scope firms must register on the virtual notification and publication platform of the BaFin (i.e., MVP platform).
• For any other notifications the BaFin or the BBank can request the electronic submission according to Sec. 1 para. 2 WpI-AnzV.

It is important to note the changes that the WpI-AnzV has undergone since its publication as a draft. In the final version, the BaFin no longer prescribes which outsourcing needs to be labelled as material/substantial and, therefore, must be notified. In-scope firms now have the autonomy to determine whether or not an outsourcing is material/substantial.

Furthermore, the BaFin provides an electronic notification form called “Anzeige von Auslagerung“ on its MVP platform. In this respect, in-scope firms shall notify the BaFin on the intention, execution and material changes of / to outsourcing arrangements via the MVP platform. After notification, the BaFin will forward the notification to the BBank if they are relevant for their regulatory activities.

As in-scope firms have been required to notify the BaFin on certain outsourcing arrangements since 26 June 2021, and the BaFin temporarily suspended these notifications, circumstances subject to notification concerning material/substantial outsourcing arrangements shall, pursuant to Sec. 64 para. 1 no. 13 WpIG, be retroactively filed via the MVP portal by 30 June 2024.

The requirements on outsourcing notifications are set forth in Sec. 13 WpIAnzV. In-scope firms qualifying as small investment firms are required to file notifications regarding the outsourcing of cloud or other information technology services only.

For notifications on topics other than outsourcing arrangements, the WpI-AnzV sets forth additional templates in its annex relating to the following topics:

• key staff changes;
• secondary activities or shareholding of managers;
• information on reliability and minimum availability;
• branches and cross-border service transactions;
• notifications of shareholdings on the assets and liabilities side; as well as
• complex shareholding structures and financial information such as the profit and loss account and the asset status.

Any form of those notifications must also be submitted via the MVP platform.

New requirements on external audits

The key elements of the WpI-PrüfbV include that the ordinance specifies the subject matter and the time as well as the form and content of an audit conducted by an external auditor. More specifically:

• Pursuant to Sec. 1 no. 1 WpI-PrüfbV, the ordinance only applies for small and medium sized investment firms within the meaning of Sec. 2 para. 16 and 17 WpIG.
• In the audit, the external auditor must adopt a risk-orientated approach, considering both the size of the investment firm and the type of its business.
• Pursuant to Sec. 10 WpI-PrüfbV the auditor shall set out information on the legal, economic and organisational principles in the audit report. In particular, any changes like the legal form or the capital structure have to be described in the audit report.

The new audit requirements apply to external audits for the financial year concluding on 31 December 2023.