Draft amendments to the German Investment Act

Purpose – The purpose of this paper is to summarize recent draft amendments to the German Investment Act as reflected in the second Draft dated 2 April 2007. Design/methodology/approach – The paper summarizes proposed changes in regulations for investment companies and product‐related changes in the German Investment Act. Findings – The paper finds that proposed changes for investment companies include investment companies losing their status as credit institutions, a requirement for an independent director on a supervisory board, a reduction in initial capital requirements, a cancellation of certain reporting obligations, an acceleration of the approval process for fund rules, a shortening of the publication process for fund rule changes, and clarification of the distinction between public distributions and private placements. Product‐related changes include modified provisions on redemption obligations and value determination as well as a requirement to maintain adequate risk management systems for open‐ended real estate funds; liberalized provisions for special funds; the introduction of infrastructure funds; and the introduction of “other funds.” A comprehensive revision of provisions for investment stock corporations is also proposed. Originality/value – A clear, concise summary of proposed amendments to the German Investment Act by a lawyer who specializes in the field, useful for German investment company compliance officers as well as compliance officers in other countries looking for an introduction to German investment company regulations.