Politics

The Federal Cabinet launches the law protecting small shareholders

Investors in the gray capital market have another link in their protective suit of armour. The Federal Cabinet approved a draft law on November 12 protecting the rights of small shareholders, and aiming to restore investor trust in the financial service market. The Federal Minister of Justice announced that the new rules will offer greater consumer protection against high risk financial products with low transparency. Indeed, the Bill requires that investors be given more information and that that information be more recent. At the same time, the suppliers of investment products are bound within certain limits as regards advertising and selling technique. The gray market, notes the government, should then become a transparent capital market. The proposal, drafted jointly by the Finance Ministry and the Ministry of Justice, is the governing coalition’s answer to the bankruptcy of wind farm financier Prokon, who took a lot of people’s money with it when it went down. The German credit market is optimistic that in the wake of the government draft bill, obligations provided for by MiFID II on the installation of procedures for obtaining product approval are not anticipated as was previously but introduced at the same time as European law on January 3, 2017. Unfortunately, this draft is still insufficient to regulate the gray capital market.