Investment Management Client Alert November 2025

Government Draft of the Fund Risk Limitation Act

On 29 October 2025, the Federal Cabinet adopted the draft of the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz). The planned law is intended primarily to implement the amendments concerning the AIFM Directive. We reported on the changes proposed in the consultation draft in our August-Newsletter. Compared to the August draft, the government draft includes several changes.

The proposal to amend the calculation of thresholds for so-called sub-threshold AIFMs has been dropped. Background: small management companies (Kapitalverwaltungsgesellschaften or KVG) that manage assets only up to a certain threshold (sub-threshold) only need to register with the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin) and comply with less stringent requirements. The calculation of these thresholds based on market values of assets (instead of book values as before), which was included in the consultation draft, has been removed in the government draft. Likewise, the stricter organizational requirements for registered KVGs with loan-originating funds, which were considered in the consultation draft, have also been removed.

For closed-end retail funds, the investment options are expanded to include investments in units of open-end retail funds and special AIFs (domestic, EU, or foreign), provided they follow a comparable investment policy. The question of possible transitional provisions for implementing the new rules for existing funds (e.g., introduction of new liquidity management tools) was not addressed in the government draft.

EU Commission Adopts Delegated Regulation on LMTs

On 17 November 2025, the EU Commission adopted the delegated regulation with regulatory technical standards (RTS) further specifying the characteristics of liquidity management tools (LMTs). The AIFM amending Directive requires that open-ended funds select at least two LMTs and include them in their fund rules. The RTS set out further details on the design of LMTs.

The European Securities and Markets Authority (ESMA) had published its final report on these RTS on 15 April 2025. Compared to the final report, the version adopted by the EU Commission includes some changes. For example, regarding the redemption gate LMT, it is now additionally permitted that the activation threshold triggering the redemption restriction may relate to either the fund level or the investor level. For the redemption fee, it was clarified that the implicit transaction costs (e.g., price discounts) considered when setting the fee may be estimated to the best extent possible.

While the requirements implemented through the Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz) from the AIFM amending Directive (Level 1) will apply to all funds from 16 April 2026, the detailed LMT requirements under the RTS (Level 2) will apply to existing funds only from 16 April 2027.

Proposal to Amend the EU Disclosure Regulation

On 20 November 2025, the EU Commission published a proposal to amend the Sustainable Finance Disclosure Regulation (SFDR). The SFDR currently governs disclosure obligations for sustainability-related information (ESG) regarding certain financial products and services. The SFDR has previously been criticized as impractical and its required disclosures as lacking meaningfulness.

The proposal replaces the current disclosure obligations under Articles 6, 8, and 9 SFDR, which vary depending on ESG characteristics, with a new product categorization: products with transition-related objectives (Art. 7 SFDR-E), products with integrated sustainability factors (Art. 8 SFDR-E), products with sustainability-related objectives (Art. 9 SFDR-E).

Each category is subject to specific requirements. All three categories require a 70% allocation to the respective ESG strategy. Certain exclusion criteria must also be observed. Disclosure obligations regarding principal adverse impacts (PAIs) at the entity level (e.g., management company level) are to be removed, and the concept will largely be abandoned at the product level as well.

SFDR requirements will no longer apply to portfolio management and investment advisory services. Special AIFs that admit only professional investors will also not have to apply the product categorization rules. Transitional provisions include, among other things, that closed-end existing funds will be exempt from the new SFDR rules. The proposal also provides for the adoption of several delegated acts to further specify ESG requirements.

ESMA Final Report on Open Loan-Originating Funds

On 21 October 2025, the European Securities and Markets Authority (ESMA) published its final report on the regulatory technical standards (RTS) for open loan-originating funds. The AIFM amending Directive introduces harmonized requirements for loan-originating funds. ESMA has the mandate to develop Level 2 measures for open loan-originating funds. The corresponding consultation was published by ESMA on 12 December 2024.

Compared to the RTS proposed during the consultation, liquidity requirements for open loan-originating funds have been somewhat relaxed. Instead of prescribing a specific liquidity buffer, the RTS now leave it to the discretion and responsibility of the management company to maintain sufficient liquidity based on expected loan repayments to the fund. In addition, liquidity stress tests are now required only annually instead of quarterly as previously proposed.

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

ESMA Final Reports on Insider Lists

On 21 October 2025, the European Securities and Markets Authority (ESMA) published its final report on the draft implementing technical standards (ITS) regarding the expanded use of the simplified format for insider lists.
ESMA had released a consultation paper on 3 April 2025, proposing new rules for the content of insider lists for all issuers in new ITS. The consultation period ended on 3 June 2025. Compared to the consultation paper, ESMA made no significant changes to the templates for insider lists in the final report.

The ITS draft consolidates the existing five templates for insider lists into three: two templates for event-based and permanent insider lists applicable to non-SME issuers and SME growth market issuers in Member States that opted out of the simplified regime; and one template for SME growth market issuers under the simplified regime, covering persons with regular access to inside information.

Other key elements of the final report concern “simplifications of data requirements.” ESMA maintained its view that all issuers should provide the national identification number of insiders and, if not applicable, their date of birth. Data fields were simplified to minimize the entry of personal data; for example, fields for private phone numbers and home addresses were removed.

ESMA also added a recital on “external service providers,” clarifying that issuers may designate a single contact person per provider as the central point of contact, while the provider remains responsible for maintaining internal insider lists.

Regarding “requirements for format and retention,” issuers under Article 18(1) MAR must maintain insider lists electronically, version-controlled, access-restricted, and audit-proof. SME growth market issuers under the simplified regime may use non-electronic formats, provided completeness, confidentiality, and integrity are ensured.

The final report, including the final ITS draft, has been submitted to the European Commission for adoption. The Commission has the usual three-month period for review and approval.

BaFin publishes new Circular on Members of Management Bodies as well as Administrative and Supervisory Bodies pursuant to the KWG

On 22 October 2025, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht or BaFin) published the new “Circular on Members of Management Bodies as well as Administrative and Supervisory Bodies pursuant to the KWG” (also referred to as the Fit and Proper (FAP) Circular). The circular explains the professional and personal requirements for individuals appointed as managing directors or as members of administrative or supervisory bodies, and provides an overview of the associated notification obligations, including the documents to be submitted. Furthermore, it provides a number of forms to facilitate the submission of notifications to BaFin by the supervised entities. The circular replaces and consolidates the previous guidance notes on managing directors pursuant to the KWG, ZAG and KAGB, as well as on members of administrative and supervisory bodies pursuant to the KWG and KAGB, in order to avoid future duplication and to implement common European Guidelines that BaFin had announced it would adopt into its administrative practice. In addition, it contains instructions for completing forms and administrative procedures, and takes into account requirements from the German Risk Reduction Act. The publication of the new circular was preceded by a consultation, following which BaFin made a clarification in particular regarding waiting periods when a person moves from the management board to the supervisory body, stipulating that as a rule, a cooling-off period of at least two years should be observed in order to adequately address potential conflicts of interest.