For financial years beginning after 31 December 2020, registered AIFMs will be subject to new auditing obligations.
As a result of amendments to the KAGB, registered AIFMs will be required to appoint an auditor to audit their annual financial statements and management report within nine months following the end of each financial year and to submit the results to BaFin. In addition, the auditor has to verify the compliance of the registered AIFM with the obligations and provisions of the Money Laundering Act (GWG) and to state this separately in the audit report.
The Act to Further Strengthen Investor Protection (Gesetz zur weiteren Stärkung des Anlegerschutzes), which partially came into force on 17 August 2021, included several amendments to the German Capital Investment Act (KAGB). The amendments affect, in particular, AIFMs required to be registered pursuant to Section 2 (4) KAGB.
The new Section 45a KAGB in particular provides the following new requirements:
- an auditor must review the annual financial statements and management report of a registered AIFM (para. 1).
- the registered AIFM must notify the Federal Financial Supervisory Authority (BaFin) of the auditor appointed by it immediately after appointment (para. 2).
- the auditor must state separately in the audit report whether, according to its findings, the registered AIFM has complied with its obligations under the German Money Laundering Act (GWG) and has observed the provisions of the GWG (para. 3).
- in the case of certain internal registered AIF-KVGs, the auditor shall determine whether provisions of the memorandum / articles of association have been complied with (para 4).
The abovementioned obligations apply to annual financial statements and management reports for fiscal years beginning after 31 December 2020. The audit of the annual financial statements and the management report by the auditor must be performed within nine months following the end of the financial year.
They do not apply to the funds themselves, but only to their managers, the AIFMs.
The obligation to submit the audit report of the annual financial statements and management report is imposed on the auditor and not on the registered AIFM. Therefore, only the auditor is in breach of regulations in the event of incorrect submission to BaFin.
The Act to Further Strengthen Investor Protection has also resulted in the following changes, which should be mentioned for the purposes of completeness:
Management of public funds requires full license
The special regulations, according to which only registered AIFMs were allowed to manage public funds pursuant to Section 2 (4a) and (5) KAGB, have been abolished. Thus, in the future, all AIFMs must obtain a license in accordance with Section 20 KAGB to manage public funds.
Special AIFs that grant money loans
The revised Sections 46 and 47 KAGB also provide specific new provisions for the preparation and audit of the annual financial statements and management reports of special AIFs that are managed by registered AIFMs and grant money loans.
No blind pool prohibitions for AIFs
An amendment to the German Investment Fund Act (VermAnlG), which has also been adopted, will result in the inadmissibility of investments in the form of so-called blind pools, i.e. where it is not yet clear at the outset which investment objects are to be financed. However, shares in investment funds, as defined by the KAGB, in particular AIFs, are explicitly not an asset investment within the meaning of the VermAnlG (Section 1 (2) VermAnlG), so that the blind pool prohibition does not apply to AIFs.