GE BaFin Sustainability Preferences

On Aug. 3, GE BaFin issued sustainability customer preference rules.

  • GE BaFin confirmed that from Aug. 2, 2022, sustainability must also be taken into account in the provision of investment advice and financial portfolio management.
  • Follows GE DK Jul. 2022 updated on new EU rules for sustainability, see #144444.
  • New Rules
  • Securities service companies must take into account sustainability preferences of their customers in providing securities investment advice or financial portfolio management.
  • This results from adjustment of Delegated Regulation 2017/565, which is applicable in Germany and with which the European legislator supplemented the MiFID II directive.
  • In concrete terms, it means investment advisors must ask clients about the wishes on sustainability and may only recommend financial instruments that meet requirements.
  • In cases where a customer cannot be offered a product that meets their sustainability preferences, they will have the opportunity to adjust these during the advice process.
  • The sustainability preferences supplement previous investment objectives, investment purpose, investment period and risk tolerance, which providers must take in account.
  • The law does not specify how sustainability preferences must be structured in concrete terms, but GE BaFin expects all providers to follow the current draft ESMA guidelines.
  • Next Steps
  • GE BaFin will closely monitor the implementation of the new regulations, and should it be necessary, it will ask that all securities services company to make improvements.
  • Compliance with the now extended regulations on the suitability test is also checked during the annual test, in accordance with the German Securities Trading Act (WpHG).
  • Like securities services firms, auditors must also refer to previously published drafts of regulatory technical standards and the ESMA guidelines in the event of open questions.
  • Effectiveness
  • The new rules on sustainability are to be applied with effect from Aug. 2, 2022.

Regulators GE BaFin
Entity Types Auditor; B/D; Bank; IA
Reference PR 8/3/2022; Reg 2021/1253; Reg 2017/565; MIFID/MIFIR Dir 2014/65, Reg 600/2014; WpHG; ESG
Functions Accounting; Compliance; Financial; Legal; Operations; Product Administration; Product Design; Reporting; Risk; Sales Practices; Suitability; Trading; Treasury
Countries Germany
Products ETFs; Fund Mgt; Mutual Funds; Securities; Wealth Mgt
Regions EMEA
Rule Type Final
Rule Date 8/3/2022
Effective Date 8/2/2022
Rule Id 144939
Linked to Rule :144444
Reg. Last Update 8/3/2022
Report Section EU

Last substantive update on 08/04/2022