fpmi calls for rules governing investment consultants serving unregulated capital markets
28. Apr 2010, Munich Financial Centre Initiative
Munich Financial Center Initiative (known by its German abbreviation of fpmi) is calling for the enactment of legislation leading to an improvement of the quality of the services provided and brokered by investment consultants. These are currently required only to secure a permit to conduct business, as stipulated by § 34c of Germany’s Commercial Regulations. This enactment would remedy the lack of trust now shown by investors in such consultants.
The lack of trust plaguing financial markets has amply shown the importance of investment consultants’ having the requisite qualifications and track records. Such traits and demonstrable accomplishments are especially important for those consultants dealing with products stemming from unregulated capital markets. These were already facing a lack of trust in the pre-crisis days, in which a number of investors suffered serious losses on them. These products are being sold in Germany by consultants whose qualification is the possessing of a permit to conduct business, a stipulated by § 34c of the country’s Commercial Regulations. This is in contrast to the situation prevailing in the insurance sector. In this area, the Regulations (§ 34d) stipulate that brokers have to furnish proof of technical expertise and of professional liability insurance.
FPMI sees this situation as requiring changing. The Initiative is therefore calling for enacting the requirements that investment consultants possess proof of trade expertise and of professional liability insurance. The latter is to have a preset minimum amount of coverage. Other requirements to secure approval for being admitted as a dealer on the unregulated markets should be demonstrable reliability and sound finances.
Verification of professional proficiency under the auspices of a public sector body
The stipulations of these new regulations can avail themselves of existing codes and established structures. Capable of emulation, for instance, is the verification of professional expertise stipulated in the Insurance Brokerage Act and undertaken under the auspices of a public sector body. The test itself can use the components of examinations leading to the securing of such qualifications as investment funds specialist, consultant on financial services, and specialist for financial consulting.
To ensure the highest level of efficiency, the responsibility for the approval process and for the registry of brokers should be entrusted to a single authority. The insurance industry offers, once more, a role model. Its authority is responsible for managing itself.
A must, according to fpmi, is customers’ being provided with access to the certifications of the investment brokers’ expertise. This, in turn, entails the registration of the brokers in a central register. This would be maintained in the Internet. Doing such would provide unrestricted and easy access to the register. Investment brokers often offer both insurance and capital investment products (for instance: mutual funds). This fact mandates the creation of a single register. It could be an adaptation of the existing register of insurance brokers.
The lack of trust plaguing financial markets has amply shown the importance of investment consultants’ having the requisite qualifications and track records. Such traits and demonstrable accomplishments are especially important for those consultants dealing with products stemming from unregulated capital markets. These were already facing a lack of trust in the pre-crisis days, in which a number of investors suffered serious losses on them. These products are being sold in Germany by consultants whose qualification is the possessing of a permit to conduct business, a stipulated by § 34c of the country’s Commercial Regulations. This is in contrast to the situation prevailing in the insurance sector. In this area, the Regulations (§ 34d) stipulate that brokers have to furnish proof of technical expertise and of professional liability insurance.
FPMI sees this situation as requiring changing. The Initiative is therefore calling for enacting the requirements that investment consultants possess proof of trade expertise and of professional liability insurance. The latter is to have a preset minimum amount of coverage. Other requirements to secure approval for being admitted as a dealer on the unregulated markets should be demonstrable reliability and sound finances.
Verification of professional proficiency under the auspices of a public sector body
The stipulations of these new regulations can avail themselves of existing codes and established structures. Capable of emulation, for instance, is the verification of professional expertise stipulated in the Insurance Brokerage Act and undertaken under the auspices of a public sector body. The test itself can use the components of examinations leading to the securing of such qualifications as investment funds specialist, consultant on financial services, and specialist for financial consulting.
To ensure the highest level of efficiency, the responsibility for the approval process and for the registry of brokers should be entrusted to a single authority. The insurance industry offers, once more, a role model. Its authority is responsible for managing itself.
A must, according to fpmi, is customers’ being provided with access to the certifications of the investment brokers’ expertise. This, in turn, entails the registration of the brokers in a central register. This would be maintained in the Internet. Doing such would provide unrestricted and easy access to the register. Investment brokers often offer both insurance and capital investment products (for instance: mutual funds). This fact mandates the creation of a single register. It could be an adaptation of the existing register of insurance brokers.