German Securities Law

Regulatory Architecture

German securities law is shaped by a dual-layer structure: directly applicable EU regulations (the Prospectus Regulation, MAR, MiFID II, EMIR) and national transposition statutes, principally the Wertpapierhandelsgesetz (WpHG – Securities Trading Act) . The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) serves as the integrated financial regulator, exercising supervisory authority over securities markets, credit institutions, insurance undertakings, and asset management. BaFin’s securities supervision division enforces disclosure requirements, market abuse prohibitions, and conduct-of-business rules, and cooperates within the European Securities and Markets Authority (ESMA) framework.

The WpHG and Market Conduct

The WpHG implements the EU Market Abuse Regulation (MAR) requirements, sets rules on insider lists, managers’ transactions, and ad-hoc disclosure obligations. Section 26 WpHG imposes an ad-hoc disclosure duty (now governed in parallel by Article 17 MAR): an issuer must immediately disclose inside information directly concerning the issuer. BaFin reviews delayed disclosures and can impose fines for breaches. The WpHG also contains the statutory basis for BaFin’s enforcement powers, including the power to require information, conduct on-site inspections, and impose administrative fines (Geldbußen) of up to €15 million or 15% of annual turnover for legal persons.

Prospectus Regulation

The EU Prospectus Regulation 2017/1129 applies directly in Germany and governs the requirement to publish a prospectus when securities are offered to the public or admitted to trading on a regulated market. BaFin reviews and approves prospectuses (Billigungsverfahren). The regulation sets uniform disclosure requirements, liability standards, and language regimes. For secondary issuances, the simplified prospectus regime under Article 14 applies. The EU Recovery Prospectus (introduced 2021) permits shorter disclosure for certain issuers. German law provides additional prospectus liability under the Wertpapierprospektgesetz (WpPG – Securities Prospectus Act) , which transposes the Prospectus Regulation’s liability framework and provides for both contractual and tortious claims.

Frankfurt Stock Exchange (FWB) Market Segments

The Frankfurter Wertpapierbörse (FWB) is Germany’s principal securities exchange, operated by Deutsche Börse AG. The FWB operates several market segments with ascending regulatory requirements. The Regulierter Markt (Regulated Market) is an EU-regulated market subject to the Prospectus Regulation, MAR, and full ongoing disclosure. Within the Regulierter Markt, the Prime Standard imposes transparency super-equivalents: quarterly reports, application of international accounting standards (IFRS), an annual financial calendar, and at least one analysts’ conference. The General Standard requires only the EU-minimum transparency level. The Freiverkehr (Open Market) is an exchange-regulated segment not subject to the Prospectus Regulation or MAR; it attracts smaller and specialised issuers but carries correspondingly lower investor protection.

Market Abuse and Enforcement

MAR Regulation 596/2014 applies directly in Germany and prohibits insider dealing (Art. 8), unlawful disclosure of inside information (Art. 10), and market manipulation (Art. 12). BaFin maintains a Market Abuse Unit (Marktmissbrauchsbekämpfung) that monitors trading, investigates suspicious transactions, and refers cases to the public prosecutor for criminal proceedings where intent is established. Criminal insider dealing is prosecuted under Section 119 WpHG (old §38 WpHG prior to MAR alignment), with penalties of up to five years’ imprisonment. Section 120 WpHG governs administrative offences with fines for negligent conduct.

Investment Code (KAGB)

The Kapitalanlagegesetzbuch (KAGB – Investment Code) transposes the EU Alternative Investment Fund Managers Directive (AIFMD) and the UCITS Directive. The KAGB governs all collective investment undertakings, distinguishing between UCITS (retail funds under Directive 2009/65/EC) and alternative investment funds (AIFs). It sets requirements for fund authorisation, depositary appointment, leverage limits, liquidity management, and investor disclosure. The KAGB also regulates the marketing of foreign funds in Germany, including the private placement regime under the Verkaufsprospektgesetz (VerkProspG) for certain closed-end funds.

Bondholder Law: SchVG

The Gesetz über Schuldverschreibungen aus Gesamtemissionen (SchVG – Bond Act) governs the legal relationship between corporate bond issuers and bondholders. The SchVG permits collective bondholder action through bondholder meetings (Gläubigerversammlungen), appointment of a common representative (gemeinsamer Vertreter), and adoption of majority resolutions on key terms including interest rate modifications, maturity extensions, and security waivers. The 2009 reforms (in response to the Lehman insolvency) lowered the quorum and voting thresholds, making collective restructuring more feasible. The SchVG applies to bonds governed by German law issued after 5 August 2009.

Disclosure Obligations

The Bundesanzeiger (Federal Gazette) publication requirements oblige issuers of listed securities to publish annual financial reports, half-yearly financial reports, and ad-hoc disclosures in German. Major shareholding notifications follow the EU Transparency Directive framework, transposed in the Wertpapierhandelsgesetz, requiring notification of voting rights crossing thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50%, and 75%. The 3% threshold is a German particularity, stricter than the EU-minimum 5% threshold.

Key Legislation Table