Investor protection

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Investor protection describes the entirety of efforts and measures that are intended to protect people in their role as investors . The assumption of a need for protection is based on the assumption that investors are “structurally inferior” to the providers of financial investments, that is, they can be easily disadvantaged due to a lack of specialist knowledge, information and / or experience (see also “ Asymmetrical information ”).

Investor protectors have made it their business to protect investors from dubious offers on the national and international capital market through information and advice. The term investor protection is not protected; anyone can call themselves an investor protector.

Need for investor protection

Under investor protection is generally understood as protection against dubious offers on the national and international capital markets and investment fraud . Investor protection not only scrutinizes the activities of the listed companies , but also particularly the providers in the area known as the gray capital market .

Losses from investors

The North Rhine-Westphalia consumer center informs that around 30 billion euros are lost annually through real estate and stock transactions that are not adequately controlled:

  • Shares in closed real estate or leasing funds,
  • silent participations in companies,
  • the sale of so-called junk properties as well
  • trading in commodity futures -

From a macroeconomic perspective, these investments in the gray area cause a high loss of money and destroy savings that were often intended for retirement provision. Many of those affected were financially ruined because they lost most or even all of their invested capital in such investment transactions.

Gray capital market

Even if not all offers and providers on the capital market are considered dubious, inferior products are sold on a large scale that aim to increase the wealth of their sellers and initiators. What makes it more difficult for investors is the increasingly complex structure and the legal design of many investment offers. These offers are difficult to understand for the layperson who is interested in capital investments that promise to make a profit for reasons of private old-age security or capital growth.

Hidden costs

Almost all offers in the aforementioned segments are equipped with such high - sometimes hidden - closing commission ( kick-back ) or follow-up costs (conception, tax advice, administration, etc.) that an appropriate profit is rarely possible. Since the sales representatives - at least in Germany - according to current case law of the Federal Court of Justice (including judgment XI ZR 305/05) are subject to strict advisory liability, it is very advisable to clarify before concluding such contracts whether the sales representative has a corresponding financial loss liability insurance - that is a prerequisite for being able to successfully enforce any recourse .

Lack of transparency of plants

It is not only the costs of investments that are sometimes opaque. The risks inevitably associated with investing, termination regulations and (realistic) profit expectations must also be known for a rational investment decision.

Financial knowledge of investors

The general financial literacy of Germans is very poor. Few investors are able to understand the information available and to make appropriate investment decisions based on it. This is especially true for young people. In 2006, 52% stated that they were “somewhat” familiar with money matters, but only 10% were able to name the current inflation rate in terms of magnitude.

Objectives of investor protection

Investor protection has three main goals:

  • Creation of transparency about the costs and risks of an investment,
  • Protection against dubious or fraudulent offers,
  • Protection of the intrinsic value of the systems.

The aim of investor protection cannot be to ensure that the investment produces the desired return. The risk of the capital investment must be borne by the investor.

The aim of investor protection must be to ensure minimum standards for transparency and protection against fraud. Critics see these minimum standards being exceeded in some areas and speak of overregulation .

Instruments of investor protection

Investor protection instruments are primarily:

  • Legal regulations,
  • Authorization requirement for providers of financial services,
  • Creating transparency and
  • Advice to investors.

In addition, 7 criteria have been established for the protection of shareholders by which investor protection is measured.

These include the regulations that

  • each share has only one voting right ,
  • Voting at general meetings also from a distance, e.g. B. by postal vote, is possible
  • Voting rights of shares cannot be excluded from the general meeting ,
  • because votes correspond to pro-rata and proportional influence that can be exerted on the company, e.g. B. through a directly elected composition of the supervisory board,
  • Minority shareholders, especially in special circumstances such as a company takeover, are protected by special regulations
  • In general, the existing shareholders are granted subscription rights in the event of capital increases and that
  • the percentage of votes required to convene an extraordinary general meeting is less than or equal to 10%.

Individual topics of consumer protection

A large number of instruments exist to ensure consumer protection.


Supervisory authorities

Financial service providers are monitored by supervisory authorities (in Germany: Federal Financial Supervisory Authority (BaFin), Deutsche Bundesbank , in Switzerland: Federal Banking Commission , in Austria: Financial Market Authority (FMA)). They have far-reaching powers to protect the investor.

Licensing requirements

The operation of credit institutions , insurance companies and other financial service providers requires approval from BaFin. Similarly, investment funds to be approved before the start of sales.

Deposit insurance

Credit institutions and insurance companies are obliged to be members of deposit insurance schemes.

Special fund

Fund companies have to manage their customers' investments separately from their own funds ( special assets ).

Accounting regulations according to HGB

The accounting rules of the German Commercial Code are strongly shaped by the idea of creditor protection . Valuations should be as conservative as possible, as the hidden reserves that result should benefit the creditor (= investor who subscribes to the company's bonds). These rules represent an early form of investor protection.


The setting of minimum standards for transparency is the central goal of a number of legal requirements for providers of capital investments.


Even for securities and funds that are not traded on the stock exchange, prospectuses must be prepared before the start of sales, from which the relevant information for the investor must emerge. The so-called prospectus liability exists for incorrect information in the prospectuses . In principle, every prospectus that is submitted to a broad public for subscription must be approved by BaFin. Only prospectuses that limit one drawing of the system to 20 subscribers (persons and / or companies) are exempt from the approval requirement.

Ad hoc disclosure requirement

In order to avoid damage to investors through insider trading , listed companies are obliged to disclose price-relevant information immediately as an ad hoc announcement.

Product information sheet

The product information sheet (also called consumer protection information or package insert) is intended to provide investors with a clear overview of the main opportunities and risks associated with banking products. It should thus enable the consumer to quickly grasp the essential properties of the financial product and to compare different investment products more easily.

General financial literacy

Even if 77% of all Germans are in favor of introducing a school subject “economics”, imparting basic economic knowledge in everyday school life plays a rather minor role.

A large number of initiatives attempt to bring the topic of money and investment into schools in order to create the basis for the right investment decisions to be made. Main article: Financial literacy .

Consulting quality

In 2008 the Federal Ministry for Food, Agriculture and Consumer Protection carried out a study on the quality of investment advice in Germany Requirements for financial intermediaries (see financial sales ) - more quality, better decisions . The core statements of the study are sobering: The German market for financial brokers is above average with 0.61 brokers per 100 inhabitants.

The degree of regulation is far below that for crafts or debt counseling.

The intermediary is faced with the typical consumer with an inadequate standard of financial education.

Failures are more the rule than the exception; 50 to 80 percent of all long-term investments are terminated prematurely with a loss.

One of the main problems of the market is that incorrect advice is noticed for a long time or not at all.

One of the recommendations in the study is that pure financial advice without product sales (“fee advice”) would offer the best protection for customers.

Investment costs

The indication of all costs for financial investments (see section on transparency) is a prerequisite for an appropriate investment decision. Even if this is already required by law in many cases, there are a number of areas in which there are hidden costs or “ kick-back ” payments to the issuer.

The cost transparency for domestic open-ended investment funds is regulated as an example. Besides giving the one-time subscription fees the fund companies are committed to the total expense ratio (TER abbreviated from English total expense ratio ) of the Fund stated. However, here too there is the option of disregarding cost components (e.g. performance-based commissions, transaction costs for securities transactions (e.g. at the parent company)). The creation of artificial transaction costs (known as churning ) is prohibited (and leads to a deterioration in historical returns).

So far, in Germany (unlike in Switzerland and Austria, for example) it is not mandatory to specify the reallocation rate (abbreviated PTR from English portfolio turnover rate ), on the basis of which the investor could more easily see whether the reallocation is in an appropriate proportion to the pursued Investment strategy.

The EU-wide directive 2014/65 / EU on markets in financial instruments (financial market directive ) goes one step further with regard to the costs of investment services and calls for "best execution", i.e. H. the execution of the order at the most favorable cost for the customer. These regulations are highly controversial. It has not yet been implemented in German law.

Investor Protection Laws



Help and advice

Assistance in an advisory sense can be obtained from a large number of institutions and associations (such as consumer advice centers and shareholders' associations ), as well as from commercial consultants, whose independence is in some cases controversial.

Because of the often particularly short limitation periods, investors should immediately contact a lawyer specializing in capital investment law if they have any doubts about the seriousness and legality of their capital investment . Since 2008 there has been the title of specialist lawyer for banking and capital market law ; the German Lawyers Association (DAV) has a working group on banking and capital markets law .

A quick and inexpensive way to protect claims for damages from the statute of limitations is offered to investors by submitting an application for a quality procedure to a state-approved quality body . In addition to the statute of limitations inhibit a quality application allows to recognize settlement options early on the opposite side of the investors, and is an economically advantageous alternative to lengthy and expensive court cases, usually with an uncertain outcome. If there is a comparison , this is documented by the conciliation body in a written contract, from which, if necessary, as from a court judgment, enforcement can be initiated, Section 794 (1) No. 1 ZPO.

See also

Web links


  1. Schutzgemeinschaft der Kleinanleger
  2. a b Youth Study 2006 by the Federal Association of German Banks (PDF) ( Memento of the original from September 29, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot /
  3. ^ Law and Finance, supra note 3; R. La Porta , F. Lopez-de-Silanes , A. Shleifer , & R. Vishny , Legal Determinants of External Finance, 52 J. FIN. 1131 (1997)
  4. Banking and capital market law in the German Bar Association