Guidance Notice for Assessing Professional Qualifications and Reliability of Managers in Accordance with VAG, KWG, ZAG and InvG

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This guidance notice is intended for all companies subject now and in the future to the supervision of the Federal Financial Supervisory Authority ( Bundesanstalt für Finanzdienstleistungsaufsicht

–
BaFin
) under the Insurance Supervision Act (
Versicherungsaufsichtsgesetz
–
VAG
), the Banking Act (Kreditwesengesetz –
KWG
), the Payment Services Supervision Act (
Zahlungsdiensteaufsichtsgesetz
–
ZAG
) and the Investment Act (
Investmentgesetz
–
InvG
). "Undertaking" will be used below as an umbrella term for all of these types of entities.

20.02.2013

The requirements for managers under the various regulatory regimes are generally very similar. However, they are based on different legislative provisions: on the one hand there are the general provisions of the VAG , which until now have been defined in more detail by an Insurance Supervision circular, and on the other hand there are regulations on notifications and the production of documents under the KWG and the ZAG . This is why a technical distinction is needed in this guidance notice.

Part A
explains the requirements for managers of undertakings falling within the ambit of the VAG .
Part B
explains the requirements imposed by the other areas of supervision.
Part C
summarises everything in the form of a sample declaration and a check list. The use of masculine designations throughout is merely for reasons of simplicity. In anticipation of an amendment:

to the Regulation on Notifications and the Production of Documents under the Banking Act ( Verordnung über die Anzeigen

und die Vorlage von Unterlagen nach dem
KWG
–
Anzeigenverordnung
–
AnzV
); to the Regulation on Notifications and the Production of Documents under the Payment Services Supervision Act ( Verordnung über die Anzeigen und die Vorlage von Unterlagen nach dem ZAG

-
ZAG
-
Anzeigenverordnung
–
ZAGAnzV
);

and

to supersede
BaFin
Circular 6/97 of 18 June 1997 published by the Federal Insurance Supervisory Office ( Bundesaufsichtsamt für das Versicherungswesen – BAV );

this guidance notice outlines which documents and declarations are required to be submitted from 1 April 2013 onwards to enable an assessment of the reliability and professional qualifications of individuals intended to be appointed as managers (hereinafter "managers").

For undertakings subject to the
VAG
, this guidance notice also applies to acting managers, authorised agents of branches of German undertakings in other EEA countries (sections 7a (1) sentence 4, 13b (2) sentence 1 VAG ), claims representatives (section 13c (1) sentence 3 no. 2 VAG ), authorised agents of undertakings from non-member states (sections 106 (3) sentence 2, 106b (1) sentence 2 no. 1 VAG ) and authorised agents of enterprises from other EEA countries that are not subject to the Insurance Directives (section 110d (2) sentence 2 VAG ) (hereinafter all referred to as "managers"). The group of people falling within the ambit of the KWG also includes all persons who have been or are intended to be authorised to act as sole representative of the institution in all aspects of its business or who have been or are intended to be appointed as acting managers (hereinafter also referred to as "managers").

A) Requirements for managers under the
VAG

I. Substantive criteria

1. Professional qualifications

Section 7a (1) sentence 2
VAG states that to meet the professional qualification requirement, managers must possess sufficient theoretical and practical knowledge relating to the undertaking's business, as well as management experience.

This is usually presumed for persons already working as managers, provided it can be demonstrated that the intended position is similar in terms of function, and there is no substantial time lag between positions.

Professional qualifications must be proportionate to the size and systemic relevance of the undertaking, as well as the nature, scale, complexity and risks inherent in the undertaking's business.

Management experience can be acquired, in particular, from having worked as an executive/manager, provided the position reported directly to management or involved managing larger-scale corporate organisational units or divisions. A managerial function requires corresponding rights of representation. Also relevant is whether, in the course of his previous activities, the manager planned, organised and monitored projects, courses of action and work processes and demonstrated his ability to manage employees and coordinate, delegate and monitor assignments. Under section 7a (1) sentence 3 VAG , these requirements are generally deemed to be met if it can be demonstrated that a managerial position was held with an insurance undertaking of comparable size and type of business for at least three years.

Professional qualifications also include possessing the necessary language skills, depending on the undertaking's business model. Attendance at appropriate further training courses may also be taken into account. Knowledge and experience with company-specific risk management is also important.

2. Reliability, including conflicts of interest

Separate and distinct from the professional qualification requirement is the requirement that managers be reliable. Persons will not be deemed reliable if, based on general experience, their personal circumstances would justify the assumption that personal matters could interfere with the prudent and proper exercise of their manager's role. The commission of criminal or administrative offences, particularly those in connection with working in the corporate sector, is of special relevance here. The prudent and proper exercise of function requires managers to have adequate time to dedicate to their work (adequate availability). Conflicts of interest on the part of managers, particularly in connection with their own commercial pursuits (for example where they are engaged in brokerage activities at the same time), may also constitute circumstances that interfere with the prudent and proper exercise of the manager's role. A conflict of interest may arise, for example, if a manager, a relative (see definition in section 11 (1) no. 1 of the Criminal Code ( Strafgesetzbuch – StGB [1] )) or a undertaking managed by the manager maintains business dealings with the supervised undertaking, which could result in the supervised undertaking becoming commercially dependent to a certain degree.

Fault is not required in order to be considered lacking in reliability.

3. Multiple management positions

Section 7a (1) sentences 5 and 6
VAG applies with regard to the number of management positions an individual may concurrently hold at supervised undertakings. Extensions of multiple management positions by reappointment are also subject to approval if the result would be that the manager concerned holds more than the two management positions permitted by law (see the BaFin guidance notice on the holding of multiple management positions).

II. Procedural issues and documents required

1. Notification of intention to appoint

a) Intention to make first-time appointment

Even just the intention to appoint a manager is subject to a notification requirement.

In notifications of the intention to appoint a manager, the undertaking's four-digit BaFin registration number should be given as the reference.

b) Intention to make a new appointment in connection with restructures

Notification of the intention to appoint is required where new appointments are made in the course of corporate restructures. [2]

c) Intention to make reappointment

Extensions of multiple management positions by reappointment are always subject to a notification requirement (see the BaFin guidance notice on the holding of multiple management positions). BaFin also reserves the right to conduct an ad hoc review of the extension of any other particular position.

If the manager is already a manager or member of the administrative and/or supervisory body of an undertaking subject to supervision by BaFin , the following documents generally need to be resubmitted in order to allow an assessment of professional qualifications and reliability. BaFin may waive this requirement in individual cases .

2. Documents to be submitted

The check list under
C)II
. outlines the documents required to be submitted.
[3]

a) Curriculum Vitae

Undertakings must submit a Curriculum Vitae (CV) providing a continuous record of experience and personally signed by the manager concerned, and containing the following information:

all given names; maiden name; date of birth; place of birth; principal place of residence; nationality; a detailed description of relevant education and training; the names of all enterprises for which the manager has worked; and details of the nature and duration of each position held, although such information is only required for parttime and honorary positions if they are/were held at insurance undertakings or other financial services enter-prises.

CVs should focus primarily on the positions held during the manager's professional career. CVs shall state the specific months ( e.g. "Feb 2011 - Apr 2013") in which the various positions were held. In the description of positions held, details of, in particular, powers of representation, internal decision-making powers and the divisions within the undertaking overseen by the manager must be provided.

In addition, details must be provided of all business dealings with the undertaking which stem from the manager's own commercial pursuits and which could result in a certain degree of commercial dependence on the undertaking (see I.2 above).

Details must also be provided of any other management, supervisory board, administrative board or advisory board positions held at other enterprises (including non-financial sector enterprises) and associations; if none is held then a statement of "nil" is required.

BaFin also requests the submission of an overview of the intended allocation of competences within the undertaking's executive board. [4]

b) Form "Disclosures relating to reliability"

A completed and personally signed declaration must be submitted to BaFin (see the form "Disclosures relating to reliability" under C) I. of this guidance notice). Details of family relationships must also be provided in this form.

c) "Criminal record check for submission to an authority", "European criminal record check for submission to an authority" or equivalent documents from another country

aa) General remarks on documents

Depending on their nationality and place of residence, managers must submit the original copy of a "criminal record check for submission to an authority" (document type "O") issued by the Federal Office of Justice (Bundesamt für Justiz) in accordance with section 30 (5) of the Act governing the Federal Register of Criminal Records (Bundeszentralregistergesetz – BZRG) (hereinafter the "criminal record check for authorities"), a "European criminal record check for submission to an authority" in accordance with sections 30 (5) and 30b BZRG (hereinafter " EU criminal record check") or, if such documents are not issued in the manager's country of residence, criminal record checks equivalent to those named above, or certifications of reliability assessments performed by supervisory authorities in the country of residence after consultation with the relevant section of BaFin (hereinafter "equivalent documents"). In countries in which criminal record checks are issued by a public agency, other documents may not be used as a substitute.

To allow
BaFin to attribute criminal record checks and documents to the undertaking to which the manager concerned is intended to be appointed, the undertaking's four-digit BaFin registration number must be stated as the reference. [5]

Managers who have resided in different countries in the previous ten years must submit criminal record checks and documents from each country. Where the documents are not in German, the original document must be accompanied by a certified translation or a translation prepared by a government appointed or accredited interpreter or translator. [6]

Applications for a "criminal record check for authorities" and an " EU criminal record check" must be made to the local registration office ( Meldebehörde ) (section 30 (2) sentence 1 BZRG). German nationals who reside outside the Federal Republic of Germany may apply directly to the Federal Office of Justice (section 30 (3) sentence 1 BZRG). The Federal Office of Justice sends both the criminal record check for authorities and the EU criminal record check directly to BaFin . The criminal record check for authorities should not be confused with the "expanded criminal record check" referred to in section 30a BZRG.

bb) Specific documents required

The following specific criminal record checks and documents must be submitted:

(1) Managers who are German nationals

and reside in Germany:

a "criminal record check for authorities" issued by the Federal Office of Justice;

and reside in a member state of the European Union:

an "
EU criminal record check" issued by the country of residence, if available; otherwise a "criminal record check for authorities" issued by the Fed eral Office of Justice and "equivalent documents" from the EU member state of residence;

and reside in a non-member state:

a "criminal record check for authorities" issued by the Federal Office of Justice and "equivalent documents" from the country of residence.

(2) Managers who are nationals of a member state of the European Union

and reside in Germany:

an "
EU criminal record check" issued by the Federal Office of Justice;

and reside in a member state of the European Union:

an "
EU criminal record check" issued by the country of residence, if available; otherwise "equivalent documents" from the EU member state of residence;

and reside in a non-member state:

"equivalent documents" from the country of residence.

(3) Managers who are nationals of non-member states

and reside in Germany:

a "criminal record check for authorities" issued by the Federal Office of Justice;

and reside in a member state of the European Union or in a non-member state:

"equivalent documents" from the country of residence.

(4) Other cases

Where there are special circumstances relating to residence ( e. g. country of residence changed in the last ten years) or nationality (e. g. a national of multiple EU/EEA states or non-member states) which are not covered by the situations described above, the extent of documents to be submitted must be agreed with the competent section of BaFin .

d) Excerpt from the Federal Business Record Register ( Gewerbezentralregister )

Managers who were or are self-employed
[7] and those who, in the course of their professional activities were or are [8]

the authorised representative of a businessperson; or charged with managing a business; or the manager of any other commercial enterprise;

must submit the original copy of an excerpt from the Federal Business Record Register in accordance with section 150 of the Industrial Code ( Gewerbeordnung – GewO ) to BaFin .

Applications for an excerpt from the Federal Business Record Register shall be made to the competent local authority (usually the registration office or trade regulatory authority (Gewerbeaufsichtsamt)) (sections 150 (2) and 155 (2) GewO in conjunction with the laws of the relevant Land). Persons who fall within the group described above and who reside outside the Federal Republic of Germany may apply directly to the Federal Office of Justice (section 150 (3) GewO ). [9]

To allow
BaFin to attribute excerpts from the Federal Business Record Register to the undertaking to which the Manager concerned is intended to be appointed, the undertaking's four-digit BaFin registration number must be stated as the refer-ence. [10]

The following instructions for the completion of form GZR 3 under the 2nd General Administrative Provisions relating to the Federal Business Record Register ( Zweite allgemeine Verwaltungsvorschrift zur Durchführung des Titels XI - Gewerbezentralregister - der Gewerbeordnung – 2. GZRVwV - Ausfüllanleitung ) shall be complied wit

the key code number "1" shall be entered in field 01 document type ( Beleg-Art ); both boxes should remain blank in field 20.

The Federal Office of Justice shall send the excerpt from the Federal Business Record Register to the manager. The excerpt must be submitted to BaFin together with the documents set forth above. [11]

e) Additional documents

BaFin may request additional documents if this is deemed necessary after evaluation of the documents referred to above.

f) No assumption of costs by
BaFin

BaFin does not reimburse the costs associated with the required documents.

3. Resignation of managers

BaFin must be notified of the resignation of managers without undue delay.
[12]
Where an authorised agent resigns, the certificate of appointment ( Bestellungsurkunde ) issued by BaFin , if any, must also be returned in order to prevent its improper use. Where a manager resigns from a smaller mutual association within the meaning of section 53 VAG , the certificate of appointment to the executive board ( Vorstandsbescheinigung ) issued by BaFin , if any, must be returned.

In order to avoid follow-up enquiries, the main reasons for the resignation [13] should be given in the notification of resignation.

III. Repeal of Circular 6/97 of 18 June 1997 published by the Federal Insurance Supervisory Office

Circular 6/97 of 18 June 1997 published by the Federal Insurance Supervisory Office will be repealed as of the expiry of 31 March 2013.

B) Documents to be submitted under the
KWG
, the
ZAG and the
InvG

I. Documents for assessing professional qualifications, including Curriculum Vitae

Section 5 (1) sentence 1
no.
1, (2) and (3)
AnzV and section 10 (2)
ZAGAnzV respectively provide an exhaustive list of the documents required to be submitted to BaFin to enable it to assess the professional qualifications of managers under the KWG and the ZAG . Section 7a (1) no. 3 InvG and section 97 (1) sentence 3 no. 3 InvG with reference to section 5 (1) sentence 1 no. 1 AnzV govern the documents required to be submitted under the InvG to demonstrate the professional qualifications of managers.

II. Documents for assessing reliability

1. Form "Disclosures relating to reliability"

In deviation of section 5 (1) sentence 1 no.
2 and sentence 2
AnzV and section 10 (1)
ZAGAnzV
, a declaration in the form of the "Disclosures relating to reliability" found under C) 1 . of this guidance notice must be completed, personally signed and submitted to BaFin . Details of family relationships must also be pro-vided in this form.

2. "Criminal record check for submission to an authority", "European criminal record check for submission to an authority" or equivalent documents from another country

Depending on their nationality and place of residence, managers must submit a criminal record check or equivalent documents from another country (see A.II.2.c) above). To allow BaFin to attribute criminal record checks and documents to the undertaking to which the relevant manager is intended to be appointed, the following information, and that information only, shall be provided:
[14]

in the case of undertakings subject to the provisions of the KWG or ZAG :
the undertaking's name and six-digit
BAK number, if available, as the reference; in the case of undertakings subject to the provisions of the InvG :
the name of the undertaking as the reference.

3. Excerpt from the Federal Business Record Register

Managers must submit an excerpt from the Federal Business Record Register (sections 149 and 150 GewO ) (for more information see A.II.2.d) above).

4. Additional documents

BaFin may request additional documents if this is deemed necessary for evaluation of the documents referred to above.

5. No reimbursement of costs by
   BaFin

BaFin will not assume the costs associated with the required documents.

C. Check lists and declarations

You will find the check lists and declarations at the top of this page as PDF files.

Footnotes:

[1]
Under section 11 (1) no.
1
StGB
, a "relative" means any member of the following category of persons:

a) relations by blood or marriage in direct line, the spouse, the same sex partner, the fiancé(e) – also within the meaning of the Same Sex Partnership Act ( Lebenspartnerschaftsgesetz ) –, siblings, the spouses or same sex partners of siblings, siblings of spouses or same sex partners, even if the marriage or same sex partnership upon which the relationship was based no longer exists, or when the relationship by blood or marriage has ceased to exist;

b) foster parents and foster children.

[2]
This requirement is based exclusively on company reorganisation and company law provisions and on the timing, according to these provisions, of formal reap-pointments.

[3]
Sections 5 (5) no.
5, 13d no.
1 (in conjunction with section 113 (1); 121a (1) sentence 1 or 121g (2) sentence 1), 13e (1) sentence 1 no. 1, 1b (2) half-sentence 1 and section 119 (2) no. 9 VAG requires undertakings to submit during the authorisation procedure or in connection with the ongoing supervision of managers the information necessary to assess reliability and professional qualifications.

[4]
See also Circular 4/2011 (
VA
), B.2.3. e) viii).

[5]
The data entry fields of computer-generated criminal record checks can only accommodate a limited number of characters, so errors can occur if too much information is entered.

[6]
Where documents are in English, the competent section of BaFin may agree, after consultation, to waive the requirement to provide a translation.

[7]

See section 149 (2) sentence 1 (a) and no.
3 (a)
GewO
.

[8]
See section 149 (2) sentence 1 no.
1 (b) and no.
3 (b)
GewO in conjunction with section 9 of the Administrative Offences Act ( Gesetz über Ordnungswidrigkeiten – OWiG ).

[9]
Because of the differences between the statutory provisions of the BZRG and those of the GewO , no corresponding distinction is made with respect to the nationality of managers.

[10]
The data entry fields of computer-generated criminal record checks can only accommodate a limited number of characters, so errors can occur if too much information is entered.

[11]
Unlike the "criminal record check for authorities" and the " EU criminal record check", the excerpt from the Federal Business Record Register for BaFin's purposes is sent to the applicant, who is then required to submit it to BaFin (the statutory provisions of the BZRG differ from those in the GewO ).

[12]
Section 13d
no.
2
VAG
(in conjunction with section 113 (1); 121a (1) sentence 1 or 121g (2) sentence 1), section 13e (1) sentence 1 no. 2 VAG .

[13]
This refers only to reasons relevant for the purposes of sections 7a and 81 (1) VAG .

[14]
The data entry fields of computer-generated criminal record checks can only accommodate a limited number of characters, so errors can occur if too much information is entered.

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