Section 6 of the Capital Investment Act (Vermögensanlagengesetz – VermAnlG) generally requires offerors which offer investments to the public in Germany to publish a prospectus. If there are indications that an offeror has failed to comply with this obligation, section 26b (2) no. 1b) of the Act permits BaFin to make the public aware of this by posting a notice on its website. This is intended to warn investors that the Capital Investment Act may have been violated and alert them to the associated lack of transparency and the added difficulty in comparing the offering to other offerings.

The Administrative Court of Frankfurt am Main has confirmed that section 28 of the Administrative Procedure Act (Verwaltungsverfahrensgesetz – VwVfG) does not compel BaFin to grant offerors a hearing prior to publishing an announcement concerning its suspicions of violations of prospectus law (case ref. 7 L 2897/20.F). The court's ruling thus supports BaFin's administrative practice. An offeror had filed an expedited petition to request the removal of such an announcement. The grounds for the petition were based primarily on the fact that the offeror had not been granted an opportunity to make a statement prior to the announcement being published.

"This court ruling reinforces BaFin's authority to make public announcements", said Beatrice Freiwald, BaFin's Chief Executive Director for Internal Administration and Legal Affairs. "Thus we can continue to ensure collective consumer protection without incurring delays."

Announcement deemed to be a "real act" (Realakt)

In the opinion of the court, a hearing is not necessary because the announcement is not an administrative act but rather a "real act", given that it is not of a regulatory nature. Specifically, BaFin does not establish any binding rights or obligations by means of such announcements. The announcement does not bring about any legal consequence, but rather serves to inform the public. Therefore, section 28 of the Administrative Procedure Act, which generally provides that the parties concerned must be granted a hearing before an administrative act is executed, does not apply.

The court also ruled out an analogous application of section 28 of the Administrative Procedure Act with regard to BaFin's announcements. Firstly, there is no unintended regulatory gap that would justify an analogous application. Secondly, the interests preceding any announcements are not comparable to those set out in section 28 of the Administrative Procedure Act. The purpose of this provision is to give the parties concerned an opportunity to safeguard their procedural rights before a binding decision is made which affects their rights and obligations. At the same time, the objective function of the provision is to establish facts. By contrast, the purpose of BaFin's announcement is not to conclusively establish facts, but rather to quickly communicate that there are indications of a public offering having been made without a prospectus that has received BaFin's approval.