investment companies

Tight and Risky Investments: How Your Supporting Company Aids You

Do you want to start your own investment company? Starting a business in this lucrative but tightly regulated industry can be challenging. Therefore, keep track: gives tips and advice on the subject of approval, opportunities in the choice of legal form, business registration, regulatory supervision, and much more. The choice for the investment companies can save you in this.

Demarcation: What is an “investment firm”?

The colloquially used the terms “investment firm” and “investment companies” are often used as a synonym for the legally correct name “investment company.” In addition, German investment law also contains the capital investment company (KAG) as a special form of the investment company. The section on possible legal forms contains details on the special features of the CISA.

According to the German Banking Act, investment companies are financial services institutions. It defines the law as follows: “Financial services institutions are companies that provide financial services to others commercially or to the extent that requires a commercially-organized business operation and that are not credited institutions.” Commercial, financial services providers, manage and trade in securities (shares, certificates, Warrants), investment funds (hedge funds), receivables (borrower’s note loans), foreign exchange, and derivatives.

Typical financial services of an investment firm

An investment firm may offer the following services:

Management of financial portfolios

Management of Alternative Investment Funds (AIF)

placement business

proprietary trading

variety of trade

Money remittance

Non- EEA deposit broking

investment brokerage

acquisition services


finance lease

investment companies

investment advice

Authorization requirement for investment companies

If you start an investment firm that is not limited to brokerage activities, you need regulatory approval in accordance with § 32 of the German Banking Act. The application must be accompanied, inter alia, by the following documents:

Proof of funds required for business operations

Indication of the manager

Proof of the reliability of the applicants (information from the central commercial register, certificate of satisfaction from the tax office, an excerpt from the Federal Central Register)

Proof of the professional suitability of the owners (pursuant to section 1 (2) sentence 1 KWG)

Submission of the business plan showing the nature of the proposed business, the organizational structure and the planned internal control procedures of the Institute

The permit application is subject to a fee.

Exemptions for the permit requirement

Companies whose activities are limited to pure lending and the brokerage of company investments (§ 2 Abs. 6 KWG) are not considered as financial services institutions and do not require BaFin permission.

Regulatory basis and supervisory authority

The investment industry is a strictly regulated business. The Investment Act (InvG) was replaced in July 2013 by the Capital Investment Code (KAGB). Government regulation and control is based on the country in which an investment firm is domiciled. German investment companies are supervised by the Federal Financial Supervisory Authority.

Qualifications: What know-how do you need to set up an investment company?

A university degree in finance and investment are prerequisites for starting a career in the industry. Since you must demonstrate your professional aptitude for regulatory approval, you need relevant work experience at the executive level.

Professional aptitude for investment companies

The Federal Financial Supervisory Authority examines your qualifications through their paces. As a business manager, you must prove your theoretical and practical knowledge. Proof of at least three years senior management of a company of comparable size and type of business.

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