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The Alternative Financing Act

In addition to the existing supervisory rules, such as the Capital Market Act 2019 (KMG; Kapitalmarktgesetz 2019), a special legal framework has been created for the purpose of easier financing, to thereby simplify access to the capital market. Furthermore the Alternative Financing Act (AltFG; Alternativfinanzierungsgesetz) also defines minimum standards for the operators of “Internet platforms” for the distribution of investments. In addition, the European Crowdfunding Service Providers Regulation (ECSPR) also applied for crowdfunding platforms for the distribution of securities and loans. Further information about the platforms can be found here.

The FMA does not supervise compliance with the provisions of the Alternative Financing Act (AltFG) or a Regulation issued on the basis of that act. Any administrative offence committed is punished by the locally competent local administrative authority. Consequently, any interpretation issues regarding the provisions of the AltFG do not fall within the remit of the FMA.

An information obligation rather than an obligation to publish a prospectus

For a public offering of securities that are not offered through a crowdfunding platform or investments as defined in the AltFG with a total consideration of up to EUR 250,000 (or up to EUR 750,000 in the case of cooperative shares) there is neither an obligation to produce a prospectus nor an information obligation. In the case of a public offering of over EUR 250,000 up to a total consideration of less than EUR 2 million there are only certain information obligations in accordance with the AltFG. The information obligations include the obligation to publish the latest financial statements without delay and to provide an annual information update

In the case of a public offering with a total consideration exceeding EUR 2 million within a twelve month period falling outside of the scope of application of the ECSPR a prospectus is required to be published, although the EUR 2 million threshold is to be calculated separately for securities and investments. Up to a threshold of EUR 5 million the obligation to produce a prospectus may be 2019 met by drawing up a simplified prospectus in accordance with Schedule D of the Annex to the Capital Market Act 2019 (KMG). In the case of securities a full prospectus pursuant to Article 4 of Regulation (EU) 2017/1129 may be drawn up on a voluntary basis in accordance with Regulation (EU) 2017/1129. In the case of investments, Article 5 para. 3 KMG 2019 provides the possibility either to draw up a simplified prospectus in accordance with Annex D, or a full prospectus in accordance with Annex A to KMG 2019, provided that the offering of investments does not exceed a total value of less than EUR 5 million.  When calculating the thresholds issuance in accordance with the AltFG are to be considered and the provision set out in Article 3 para. 1 AltFG observed.

If the total consideration exceeds EUR 5 million or where the threshold pursuant to Article 3 para. 1 AltFG is exceeded, then the general obligation to produce a prospectus applies.

A detailed overview of the threshold values can be found at the end of this page under “Downloads”.

Individual investment limit

The maximum amount that may be invested by any investor over a twelve-month period must generally not exceed EUR 5,000. This limit does not apply in the case of professional investors as defined in the Alternative Investment Fund Managers Act (AIFMG; Alternatives Investmentfonds Manager-Gesetz) or in the case of legal persons (provided they are not consumers) or if the investor provides the corresponding information on income and/or financial assets.

Information obligations and right to withdraw

This obligation to provide investors with information is met by providing an information document (see “Information document in accordance with the AltFG”) that complies with the terms of the AltFG and the Alternative Financing Information Regulation (AltF-InfoV; Alternativfinanzierungs-Informationsverordnung). The information should be checked for coherence, completeness and comprehensibility by, for example, an auditor, a lawyer, a notary, a management consultant, an asset manager or the responsible audit association in the case of a cooperative.

This check should also involve ensuring that the contractual conditions and information document are consistent with each other. Where information is not made available to a consumer in accordance with the Consumer Protection Act (KSchG; Konsumentenschutzgesetz), the consumer is entitled to withdraw from the offer or contract concerned. The withdrawal right shall lapse upon expiry of a two week period after the day upon which the investor has received the missing information and the investor has been briefed about their withdrawal right.

Administrative penalties and Enforcement

Enforcement of the AltFG falls within the competences of the local administrative authorities (district administration or municipal authority) rather than those of the FMA. Consequently, the FMA therefore does not AltFG issuers or platforms per se, but only in instances where these are subject to supervision as provided for under other Federal Acts (particularly in cases where securities or loans are being brokered over the platform pursuant to the ECSPR). The local administrative authorities may impose administrative penalties of up to EUR 30 000.

Further information: