The Circular applies primarily to retail clients but in some instances will also apply to professional clients. (Based on the assumption that eligible counterparties are able to identify and evaluate the information they receive in particular in relation to financial instruments, the Circular is not applicable to eligible counterparties).

In accordance with MiFID, the key principle applicable to information made available by investment firms to their clients is that all information must be "fair, clear and not misleading". The Circular states that all investment firms must comply with MiFID and further German implementing rules irrespective of the medium used.

The Circular then sets out what compliance means for investment firms disseminating material and information to clients and, in particular, details the additional requirements applicable to marketing material. "Marketing material" is defined in the Circular as information that induces the addressee to acquire financial instruments or to order investment services (Marketing Material).

The overriding principle is that Marketing Material must be clearly recognisable as such. If it is not obvious from the information itself, an investment firm is required to state and highlight that the material constitutes Marketing Material.

BaFin recognises that not all information used by an investment firm qualifies as Marketing Material. If, for example, the information was given in connection with investment advice, it is neutral product information or the investment firm provides the investor with obligatory information, it may not necessarily be classified as Marketing Material. However, if for example an article in a client magazine appears to be objective, but primarily aims to promote sales then a labelling as Marketing Material is required. Investment research, which includes by its nature an objective and independent recommendation, must always be labelled as Marketing Material. Investment research is subject to additional rules as outlined in the Ordinance on the Analysis of Financial Instruments (Finanzanalyseverordnung) (FinAnV) and is, therefore, exempt from the remainder of the provisions of the Circular.

Another important aspect of the Circular relates to who is responsible for ensuring compliance with the relevant provisions of the law and the Circular.

In essence, BaFin distinguishes between three different scenarios: where a German investment firm (German Disseminating Firm) disseminates Marketing Material it receives froml:

The above applies, for example, to an asset manager of funds producing Marketing Material which is published on the website of the German Disseminating Firm. In this case, BaFin imposes an obligation on the German Disseminating Firm to ensure the Marketing Material complies with the requirements of the Circular.

One further consequence is that German Disseminating Firms offering information on their website or through other media, for example, will need to place greater emphasis on the review process. To reduce the risk of breaching regulatory rules, a German Disseminating Firm may attempt to transfer the risk via contractual arrangements with providers of the Marketing Material. Although this may not assist with regard to breaches of regulatory rules, it will at least demonstrate to the regulator and the client that attempts were made to ensure that the applicable rules were observed.

The Circular provides that:

One example highlighted by BaFin refers to the declaration of products as "guarantee certificates". According to BaFin, the use of the term "guarantee" might be misleading and requires further explanation, for example a reference to the capital protection or a reference to the addressee of the guarantee.

The Circular highlights the importance of Marketing Material being up to date. For example, if the economic position of a specific instrument changes, it may become necessary to update the Marketing Material to reflect the different circumstances.

However, information posted on the internet is not required to be updated if the sales material is made available on the website of the issuer or of the German Disseminating Firm after the termination of the subscription period. In this situation the German Disseminating Firm cannot be expected to continue keeping Marketing Material up to date. However, a clearly visible reference to the date the information was produced is required in such cases.

BaFin emphasises the principle of proportionality. Where, in the Marketing Material a party describes the benefits of a product, the Circular requires the risks of the product to be presented in a proportionate manner. In other words, the method, form and extent of presenting the advantages of a product in marketing material must correspond directly with the presentation of risks.

The key issue will be the determination of the proportionality in the particular product. If, for example, a discount certificate offers the benefit of an investment in an underlying asset at a reduced price, a reference to the limited participation in the increase of the value of the underlying due to the cap, is required.

Furthermore, BaFin has pointed out that referring to other documents for the presentation of risks/disadvantages is not sufficient, even if another document such as a key investor document, is directly attached. In practice, this is likely to have a significant impact on market participants. In particular, care must be taken to ensure a balanced presentation of benefits and risks/disadvantages in cover letters addressed to clients.

In light of the Circular, market participants will need to review their Marketing Material to ensure that the principle of proportionality has been taken into account. In the long term it is likely that the provisions of the Circular will have an effect on decisions of German courts in the context of deciding whether the risks had been described sufficiently and where damages are claimed.

The Circular details the requirements regarding the presentation of performance data.

In particular the following is set out:

In light of BaFin's detailed interpretation, combined with a statement that it will investigate market participants in greater detail to establish whether the compliance requirements are met, we would advise market participants to review their existing Marketing Material to ensure it complies with the standards outlined in the Circular. In addition, the process of producing and disseminating Marketing Material and other information should be outlined in internal policies.