*by Dr. Johannes Fiala, Lawyer (Munich), Mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Lecturer in Civil and Insurance Law (Univ. of Cooperative Education), Banker (www.fiala.de)
“The world is more than what we see.” (Professor Lisa Randall, Univ. Harvard)
It is generally known in the financial sector that some initiators sometimes have a lot of hope for a sustainable placement – but unfortunately no corresponding success is achieved later. Often, for example, the examination of concepts from the area of “mezzanine capital” brings to light considerable design errors as a cause. The sales department, however, learns about this far too late, with nice regularity.
The intermediaries often know neither the actual placement status nor the capital actually invested in the projects. The expert Dr.Schulte brings it to the point in the expert forum:
“…often investors and also the sales department are deliberately left in the dark about the actual success of an investment product because the focus is only on the subscription amount. Focusing on the subscription amount as a statement of intent by market participants and as susceptible to manipulation is not a good evaluation criterion. It is better to ask what the actual amount paid in actually is. …“
Duty to provide information, analogous to § 31 WpHG. The investment advisor and broker is obliged to check the plausibility of the concepts offered by him. A company “Cash media AG” had offered years ago a profit coupon capital in the million range (see issue folder) – in the year 2005 then 54,500 euro were paid in (see mail of 19.01.2007). Whether this covered the costs of the issue? A “GuB rating” has apparently not yet become known?
Additional key figures: Actual investor capital and invested capital about a placement status, the initiator can easily deceive the sales force. Suspicion arises as soon as “a nasty rumour makes the rounds”, i.e. when fictitious subscription forms are used. The lawyer then speaks of suspected fraud.
It is therefore more crucial for intermediaries and sales to ask about the sustainability of the investment offer, i.e. – to ask the question “how high is the subscription capital actually received by the initiator”, and – to ask the further question “how high is the capital actually invested by the initiator”.
Plausibility checks require transparency, often more transparency than is usually available at present. In this respect, the inquiry of hard key figures is important in order to be able to better estimate the total loss risk which is subject to disclosure for the sales department.
(www.experten.de on 12.02.2007)
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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