The goal was to reinforce BaFin's supervisory efforts aimed at strengthening collective consumer protection and to detect advertising violations by subjecting the markets to the most comprehensive supervision possible.

To this end, BaFin investigated not only sales documentation and advertisements for retail investment funds, websites of German asset management companies (Kapitalverwaltungsgesellschaften), and advertising for public offers of securities and capital investments, but also searched for advertisements for investment services and financial instruments on Internet search engines. They examined a total of 244 websites and more than 170 advertisements.

In doing so, BaFin came across 74 possible violations – only a few of which originated from undertakings which are subject to its ongoing supervision. BaFin is still investigating some of these suspected cases and it has already taken supervisory measures against some offerors.

German asset management companies and investment funds

As part of its Internet research, BaFin examined a total of 82 asset management companies and 162 retail investment funds to ascertain whether the sales documentation had been properly provided and whether the sales prospectus and key investor information were referred to in the advertisements. In addition, BaFin investigated whether the asset management companies had presented the legal notices on their websites properly.

BaFin found no irregularities in 92 per cent of the retail investment funds it examined (see graphic 1). This is a pleasing result which can be attributed both to the asset management companies' high level of professionalism and to the ongoing supervision conducted by BaFin, which, as soon as it becomes aware of such violations, always takes immediate action to ensure they are remedied.

In only 13 cases was it found that either not all sales documentation required by investors for comprehensive information about the financial product had been provided or that the sales prospectus and the key investor information were not referred to adequately.

Irregularities in retail investment funds

Graphic 1: Irregularities in retail investment funds Source: BaFin

In the examination of the legal notices on the websites of the asset management companies, BaFin found a total of ten cases where the legally required reference to BaFin as supervisory authority was either incomplete or missing altogether.

Advertising for public offers

As part of its Internet research, BaFin also examined advertising for public offers of securities and capital investments pursuant to section 2 no. 4 of the WpPG and section 1 (1) of the VermAnlG. Offerors must submit a prospectus to BaFin and have it approved before publishing it. In addition, BaFin searched for public offers online for which no prospectus had been submitted. It used not only popular search engines to do this, but also financial and news portals.

BaFin came across a total of 44 suspected cases. More than half (29) of these cases had to do with unauthorised offers, meaning that no BaFin-approved sales prospectus had been published.

Securities

In the advertisements for publicly offered securities, the reference to the prospectus or information about where the investor could obtain it was missing in three cases. The remaining 22 violations had to do with unauthorised offers of securities.

In terms of the types of securities in regard to which BaFin detected violations, (non-listed) shares dominated at 27 per cent (see graphic 2). A further 12 per cent of the suspected cases related to profit-participation certificates and 23 per cent related to other securities, such as certificates and convertible bonds. However, a large proportion of the securities in question could not be clearly attributed to any group due a lack of information on the respective websites.

Suspected cases by securities group

Graphic 2: Suspected cases by securities group Source: BaFin

BaFin detected no violations by offerors against whom it had previously taken supervisory measures due to suspected unauthorised public offers. This indicates that the measures were successful.

Capital investments

As regards the forms of the capital investments being advertised, most of the suspected cases concerned holdings in undertakings. Subordinated loans accounted for three of the suspected cases and capital investments within the meaning of section 1 (2) no. 7 of the VermAnlG accounted for five. These capital investments have only been subject to the prospectus requirement since the Retail Investor Protection Act (Kleinanlegerschutzgesetz, only available in German) came into force in July 2015.

In regard to the advertising of publicly offered capital investments, it was found that only one advertisement contained the warning about the risk of complete loss of invested funds specified in section 12 (2) of the VermAnlG. In eleven advertisements, no reference was made to the prospectus (see graphic 3). Five advertisements contained information about the possible yield, but did not draw attention to the possibility that the return might also be lower. In addition, offerors violated regulations by advertising with excessively favourable conditions, using the restricted term "Fonds" (fund) and referring to BaFin’s competencies or the supposed security of the capital investment for advertising purposes.

Violations of advertising regulations for capital investments

Graphic 3: Violations of advertising regulations for capital investments Source: BaFin

These results demonstrate once again that persons who wish to invest in financial products that are subject only to a prospectus requirement should be particularly careful. Vigilance is especially required if the advertisements describe the financial product in excessively positive terms and as having little risk.

Advertisements on search engines

BaFin also examined a total of 129 advertisements for investment services and financial instruments on Internet search engines which orientate their results towards the search behaviour of the user. Around a third of the advertisements here were for undertakings and offerors that are not subject to supervision.

BaFin found advertising violations in seven advertisements. The advertisements stated the advantages of the financial products being promoted without referring to the related risks.