Investment advice

Section 1 para. 1a sentence 2 No. 1a of the German Banking Act (KWG) as well as (with the same wording) S. 2 para. 8 sentence 1 No. 10 of the German Securities Trading Act (WpHG) contains a definition of investment advice as the provision of “personal recommendations relating to transactions in certain financial instruments to clients or their representatives insofar as the recommendation is based on a consideration of the investor’s personal circumstances or is presented as being suitable for the investor and is not provided exclusively through distribution channels or for the general public”.

Such a personal recommendation may take the form of non-independent advice or fee-based investment advice. The activity requires a licence from BaFin in accordance with Section 32 KWG. However, an investment advisor may make use of the exception provided for in Section 2 para.6 No. 8 KWG, according to which investment advice may also be provided on the basis of a licence pursuant to Section 34f of the German Trade, Commerce and Industry Regulation Act (GewO). In that case, the legislator refers to a “financial investment broker”.

BaFin maintains a register of reports and complaints of all investment advisors on its website. A financial investment broker, on the other hand, must be registered in the public broker register of the German Chamber of Industry and Commerce (IHK).