Investment Management Client Alert October 2025

ESMA and EBA Publish Proposals for IFD Review

On 15 October 2025, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) presented their report with proposals for revising the Investment Firms Directive (IFD) and the associated regulation (IFR) (IFD Review). 

As part of the planned review of the IFD and IFR, ESMA and EBA propose, among other things, clarifications regarding the determination of own funds. This concerns the calculation of assets under management in ongoing investment advice, which are relevant for the K-factor. The requirements for variable remuneration are meant to be relaxed to some extent. It is recommended that the threshold-based exceptions for the payout restrictions regarding variable be raised to bring them into line with those in banking regulation. 

The report will be submitted to the European Commission, which in turn will present its report on the IFD review to the European Parliament and the Council.

BaFin Issues Product Intervention for Turbo Certificates

On 15 October 2025, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) (BaFin) issued the expected product intervention measure for so-called “Turbo Certificates”. It only applies to the distribution to retail investors that are based in Germany and does not generally exclude it. However, in future, higher requirements for the suitability test in the form of a semi-annual knowledge test on the functioning of turbo certificates and a ban on monetary or non-monetary benefits must be observed. In response to the comments received during the previous consultation, BaFin has extended the implementation period from the originally planned three months to eight months in order to take into account the high technical and administrative effort required by affected entities. The product intervention measure will therefore not come into force until 16 June 2026.

EU Commission Postpones Implementation of Level 2 Measures in the Financial Services Sector

On 6 October 2025, the European Commission announced that it will postpone the implementation of numerous Level 2 measures in the financial services sector. These measures, which are based on Level 1 requirements, include delegated acts and technical standards that specify existing EU regulations and directives. During the last legislative term, around 430 such Level 2 measures were adopted.

The decision not to adopt certain Level 2 measures before 1 October 2027 aims to reduce regulatory complexity and facilitate compliance for the parties concerned. This so-called "de-prioritisation" strategy is part of the European Commission's regulatory simplification agenda. The goal is to postpone nonessential requirements in order to reduce the administrative burden on market participants. At the same time, it has been announced that existing authorizations at the level of the underlying Level 1 legislation will be reviewed, with the possibility of adjusting or repealing them, if necessary.

It is important to note that only those measures with no legally defined deadlines for implementation will be postponed. This applies in particular to Level 2 measures in connection with Solvency II, the Sustainable Finance Disclosure Regulation (SFDR) and EU taxonomy.
The postponed measures also include Level 2 acts relating to the amendment of the AIFM Directive (AIFMD review). Among other things, this affects technical standards for open-ended loan-originating AIFs.

Higher Regional Court of Dresden on Content Review of Qualified Subordination Clauses in Loan Agreements

In a decision of 5 March 2025 (5 U 1392/24), the Dresden Higher Regional Court (Oberlandesgericht Dresden) ruled that so-called qualified subordination clauses with a pre-insolvency enforcement ban in loan terms of a crowdfunding platform are subject to transparency control pursuant to Section 307 (1) sentence 2 of the German Civil Code (Bürgerliches Gesetzbuch) (BGB), but not to adequacy control pursuant to Section 307 (1) sentence 1 BGB, and also provided important guidance for the legally compliant drafting of subordinated loan agreements.

The platform operator had provided standardized loan agreements on its website, which investors could use to provide capital to capital seeking companies in the form of subordinated profit-participating loans as part of an investment agreement. The plaintiff investor had argued that the provided documentation did not sufficiently explain the far-reaching effects of the pre-insolvency enforcement ban and that the loans constituted an illegal deposit business in terms of Section 1 (1) sentence 2 no. 1 of the German Banking Act (Kreditwesengesetz) (KWG).

In its ruling, the Dresden Higher Regional Court first stated that the use of the subordination clause in the investment agreement was not surprising within the meaning of Section 305c (1) BGB, as the nature of the agreement as a qualified subordinated loan was already indicated in the heading and preamble of the agreement. In the court's opinion, the provisions on the pre-insolvency enforcement ban and the qualified subordination did not violate the transparency requirement arising from Section 307 (1) sentence 2 BGB, as the investment agreement (in some cases even through the use of bold letters) made sufficiently clear that they imposed an entrepreneurial risk of loss on the lender that was equivalent to that incurred with equity capital, without at the same time granting corresponding rights to information and participation. However, in the opinion of the court, the provisions on the pre-insolvency enforcement ban and the qualified subordination were not subject to a content review in the narrower sense of an appropriateness review pursuant to Section 307 (1) BGB, as they were considered to be part of the lender's main performance obligation.

ESMA Publishes RTS on Green Bonds and ESG ratings

On 15 October 2025, the European Securities and Markets Authority (ESMA) published two final reports: the final report on regulatory technical standards (RTS) under the European Green Bonds Regulation and the final report on technical standards under the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities. 

The RTS on European Green Bonds sets out requirements for external auditors of green bonds and covers, among other things, organizational requirements, compliance, staff qualifications, data quality, and procedures for notifying ESMA of material changes to registration information.

The RTS for ESG rating activities sets out requirements for authorization, management of conflicts of interest, and transparency (disclosures).

The European Commission now has three months to decide on the adoption of the RTS. 

MiCA—RTS on Liquidity Management Published

On 3 October 2025, Delegated Regulation (EU) 2025/1264 of the European Commission, which lays down regulatory technical standards (RTS relating to the Markets in Crypto-assets Regulation (MiCA), was published in the Official Journal of the European Union.

These RTS specify the minimum content of liquidity management policies and procedures for certain issuers of:

• Asset-referenced tokens (ARTs); and
• Electronic money tokens (EMTs).

The RTS require issuers to implement comprehensive procedures for identifying, measuring, and managing liquidity risks. In addition, they provide for a contingency policy and risk mitigation tools and outline minimum requirements for liquidity stress tests.

The delegated regulation entered into force on the 20th day following its publication in the Official Journal, i.e. on 23 October 2025.

ESMA Final Report on Securities Settlement Periods

On 13 October 2025, the European Securities and Markets Authority (ESMA published its final report on the amendment of technical regulatory standards (RTS relating to the EU Regulation on Central Securities Depositories (CSDR). The revision of the CSDR, which came into force in 2024, aims to improve the efficiency of securities settlement in the EU (CSDR Refit). ESMA has a mandate to develop Level 2 measures (amendment to the delegated regulation) to improve settlement discipline and efficiency. The measures also serve to introduce a T+1 settlement deadline.

Among other things, the RTS proposed by ESMA stipulate that investment firms must ensure that professional clients acting as buyers submit their allocation and trade confirmation by 11:00 PM on the trading day at the latest in order to align operational processes with the targeted settlement cycles. The settlement instructions must then be sent to the central securities depository by 11:59 PM at the latest. Furthermore, this data must be transmitted in an electronic and standardized format. 

The EU Commission now has three months to decide whether to adopt the RTS. 

BaFin consults on Crypto Markets Notification Ordinance

On 29 September 2025, BaFin published a new ordinance on notifications and the submission of documents under the Crypto Markets Supervision Act (Kryptomärkteaufsichtsgesetz) (KMAG) and opened it for consultation. The KMAG was enacted to implement the requirements of EU MiCAR (Regulation (EU) 2023/1114) and contains provisions that need to be clarified and specified in more detail by further ordinances. The new ordinance is intended to specify the notification and submission requirements set out in Section 21 KMAG. By defining requirements as clearly as possible and using standardized forms and identical regulations across various supervisory laws (such as the German Banking Act (Kreditwesengesetz) or the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz)), BaFin aims to establish a low-effort reporting system also for the crypto sector. The consultation is open until 29 October 2025, and the ordinance is scheduled to enter into force on 1 January 2026.