The International Capital Markets Review: Austria

Introduction

i Structure of the law

Austrian capital market law and regulation is mainly driven by EU regulation, and the relevant EU directives have been implemented in Austrian law without substantial deviations. Austrian capital market law comprises three main areas:

  1. the public offering of securities and investments;
  2. the listing of securities on a regulated market or a multilateral trading facility (MTF); and
  3. the provision of investment services and activities between market participants.

Public offerings

Public offerings2 of securities in Austria are mainly subject to EU regulation, as the directly applicable Prospectus Regulation,3 which replaced the Prospectus Directive4 in 2019, sets out the general requirements for the drawing up, approval and distribution of a prospectus for public offerings of securities or their admission to trading on a regulated market. In principle, a public offering of securities is permissible in Austria if the requirements under the Prospectus Regulation and the Austrian Capital Market Act are met, and a public offer for securities may only be made if a prospectus drawn up and approved in accordance with the provisions of the Prospectus Regulation has been published at a reasonable time in advance of, and at the latest at the beginning of, the offer to the public or the admission to trading of the securities involved.

Beyond the scope of EU regulation and in addition to certain procedural matters, the Austrian Capital Market Act predominantly deals with public offerings of 'investments'. This category mostly includes certain types of non-securitised property rights5 but also comprises all transferable, securitised rights that are not included in the definition of transferable securities as defined in Regulation (EU) 2017/1129. While the requirements for public offerings for investments follow the same scheme as those for public offerings of securities, the Austrian Capital Market Act has certain peculiarities:

  1. the content of the prospectus is not defined by the Prospectus Regulation but by various schemes attached to the Austrian Capital Market Act, stipulating less comprehensive content requirements;
  2. unlike the requirement for approval of securities prospectuses by the Austrian regulator, there is no governmental approval; however, the correctness and completeness of the investment prospectus have to be scrutinised by an external expert as a 'prospectus auditor'6 and, where applicable, this has to be confirmed and signed by the prospectus auditor; and
  3. the investment prospectus is not eligible for an EU passport, and thus is limited to public offerings in Austria.

Listings

Listings of securities can be effected on the Vienna Stock Exchange (VSE), currently Austria's only stock exchange, which is one of the world's oldest stock exchanges and was founded in 1771 during the reign of Empress Maria Theresa of Austria to provide a market for state issued bonds.

The regulatory framework for listings is primarily provided by national legislation, in particular by the Austrian Stock Exchange Act (although various EU regulatory provisions have also been implemented in this Act). Main areas of the Austrian Stock Exchange Act comprise the management and operation of VSE, the admission to trading on the Official Market, which is the only regulated market in Austria pursuant to Directive 2014/65/EU (MiFID II), and the follow-up obligations arising from an admission to listing and trading on the Official Market.

The exchange operating company, Wiener Börse AG, also operates the Vienna MTF as a multilateral trading system for the trading of financial instruments based on separate general terms and conditions – the Rules for the Operation of the Vienna MTF, which have been prepared with the approval of the Austrian regulator.

Official Market listings

Under the Austrian Stock Exchange Act, securities are eligible for admission to listing and trading on VSE's Official Market if, as a general requirement, the securities can be traded in a fair, orderly and efficient manner and are freely transferable. The following more specific requirements, among others, have to be fulfilled:

  1. the establishment and the by-laws or articles of association of the issuer must comply with the laws of the country in which the issuer has its registered office;
  2. the free float must be of a sufficient size; and
  3. in relation to an equity listing, the issuer must have existed for at least three years and have audited financial statements for the past three financial years.

Furthermore, the admission to listing and trading on the Official Market requires an approved prospectus. In practice, the prospectus approved by the Austrian (or other EEA Member State) regulator for a public offering also serves as the admission prospectus.

In relation to stocks admitted to listing and trading on the Official Market, VSE also offers inclusion in its premium market segment, or 'prime market', which requires the stock to be included in continuous trading, an increased minimum free float of at least 25 per cent and a free float capitalisation of at least €20 million.

The admission to listing and trading on the Official Market triggers various follow-up obligations, including regular and periodic publications of financial information, publication of price-sensitive information and managers' transactions under the Market Abuse Regulation (MAR) regime, and changes in substantial shareholdings.

MTF listings

As noted above, the Vienna MTF is regulated by VSE based on the Rules for the Operation of the Vienna MTF.

In contrast to the Official Market, the Vienna MTF, as a multilateral trading system, is not subject to the Stock Exchange Act requirements that apply to the regulated market. Accordingly, the requirements for inclusion in the Vienna MTF are substantially reduced in comparison. For example, the legal status of the issuer and the issuance of the securities must comply with the laws of the country of the issuer's registered office; and for private placements, an information memorandum must be drawn up, including a description of the issuer and its business, financial statements (if available or otherwise a business plan) and, in the event of a public offering, the approved prospectus pursuant to the Austrian Capital Market Act. The follow-up obligations are also substantially reduced and comprise only the publication of price-sensitive information and managers' transactions, and the maintenance of insider lists in accordance with the MAR regime.

In practice, VSE has been very successful in recent years in attracting listings for the Vienna MTF, particularly in relation to debt listings, and this is borne out impressively by the relevant numbers: the total number of listed bonds on the Vienna MTF has increased from 1,238 in 2016 to 3,902 in 2021 (year to date).

Provision of investment services

The Austrian framework for the provision of investment services was substantially changed in 2018 by MiFID II, which has been transposed into Austrian law by the Austrian Securities Supervision Act 2018, and by the directly applicable MiFIR.7 In general, the level of investor protection in Austria is set by the European legislation, which is the basis for the rules on business conduct for providers of investment services and ancillary services, to safeguard the interests of investors. To ensure there are no requirements that go beyond the EU minimum requirements, the Austrian Anti-Gold Plating Act 2019 was adopted; this is a cumulative amendment of several laws aiming to abolish additional regulations.

The Austrian Securities Supervision Act 2018 has significantly increased the level of investor protection and transparency in relation to investment advice, products and costs, and has extended the powers and sanctioning regime available to the Austrian regulator. In recent years, market participants such as banks and investment firms have been facing innumerable new obligations, resulting in higher compliance costs. This is a trend that has been driven by the overall goal to improve the level of investor protection as a whole.

Transparency of investment advice

The Austrian Securities Supervision Act 2018 has a strong focus on investors' interests, and in addition to legally defining commission-based 'dependent' investment advice, it has defined the model for fee-based 'independent' investment advice. The investment service provider in this latter instance is not allowed to accept either commission or other incentives from third parties (e.g., the creator of the investment product); in the event that such incentives are nevertheless received, they are to be passed on to the client.

Product approval and product governance; transparency

All manufacturers and distributors of financial instruments must define the target market when developing or distributing an investment product. This means that they are required to define the target group (e.g., retail clients and professional clients) that the investment product has been tailored for, as well as stating the range of knowledge and experience that the relevant investors are required to have and the minimum extent of their ability to absorb losses. The risk or performance profile of the investment product, as well as its recommended holding period, must also be defined. Whether the investment product is tailored in such a way as to fulfil special client requirements (e.g., for clients wishing to make sustainable investments) must also be determined.

These obligations for market participants are closely monitored by the Austrian regulator, which in the context of collective consumer protection means the regulator is focusing on improving market transparency; for example, by adopting minimum standards on the requirements for information provided to customers prior to entering into contracts, during the contractual term and upon termination of the provision of financial services; and by means of ongoing monitoring of compliance with regulatory information requirements, particularly with regard to transparency about costs.

Market trends

The increased burden for investment service providers in the past few years has resulted in a decline in appetite for the marketing of investment products to retail clients. This trend is confirmed by available market data: while savings deposits have a particularly high significance, investments in securities are much less significant by comparison and have actually fallen during recent years.8 In addition, the covid-19 pandemic and the related containment measures have significantly dampened household income, resulting in the further increase of households' savings, demonstrated by a surging saving ratio from 8.2 per cent in 2019 to 14.4 per cent in 2020.9

Moreover, similar to other jurisdictions, Austria has seen a rise in green or social bond issuance, or both, (mostly along the lines of ICMA principles), including important issuance activity from the two major Austrian banking groups.

ii Structure of the courts and specialist tribunals

Administrative proceedings

In relation to the Austrian capital market, the Austrian Financial Market Authority (FMA) as competent regulator has a wide range of responsibilities and in particular is in charge of the following:

  1. the approval of securities prospectuses for public offerings or listings;
  2. general investor protection measures under the Prospectus Regulation and the Austrian Capital Market Act, such as ensuring public offerings fulfil the requirements in relation to the drawing up, approval, scrutiny and publishing of a prospectus, providing incorrect information in a prospectus and in relation to publishing misleading advertising;
  3. the supervision of issuers' compliance with follow-up obligations under the MAR regime;
  4. the supervision of VSE; and
  5. the licensing and supervision of investment service providers.

In cases of non-compliance with capital market law, the FMA, as first instance authority, may impose substantial fines or other sanctions, or both.

It is possible to appeal against FMA rulings, in which case competence is transferred to the Federal Administrative Court. In the subsequent administrative proceedings, the Federal Administrative Court must follow the administrative procedure laws and conduct an oral hearing at the request of any involved party or if it considers it necessary or in any case in administrative penal proceedings.

Decisions of the Federal Administrative Court can be appealed either to the Austrian Supreme Administrative Court, if the case involves a legal question of fundamental importance, or to the Austrian Constitutional Court, if constitutionally guaranteed rights are violated.

Civil proceedings

The Austrian court system in relation to disputes between private persons is basically three-tiered (i.e., it consists of a court of first instance, an appellate court and a supreme court). Courts of first instance in civil matters can be either a district court, for civil litigation in general with an amount in dispute not exceeding €15,000, or a regional court if the amount in dispute exceeds €15,000.

While for decades Austrian law did not provide a codified instrument to address the giving of false, incomplete or misleading information in connection with the raising of funds via the capital market, Austrian courts were adjudicating on investor lawsuits based on the Roman law-based doctrine of culpa in contrahendo (i.e., the culpable violation of obligations arising from a pre-contractual (legal) obligation). In 1991, a precise codified concept of civil and criminal prospectus liability was introduced by the Austrian Capital Market Act. In practice, however, prospectus liability and other grounds for investor claims, such as liability for delayed or misleading ad hoc information or inaccurate investment advice, only gained importance as an after-effect of the global financial crisis. Since then this situation has developed considerably and the jurisprudence has evolved to the extent that Austria must now be considered to have an extensive judicial practice in all kinds of investor claims.

iii Roles of local agencies and central banks

FMA

The FMA is the single statutory supervisory body directly responsible for banking, insurance and pension funds, securities and stock exchange supervision. The FMA is an institution under public law, with separate legal personality and independence secured by constitutional provision.

In organisational terms, the FMA is divided into six departments:

  1. banking supervision;
  2. insurance and pension supervision;
  3. securities supervision;
  4. integrated supervision;
  5. services; and
  6. bank resolution.

Each of the departments is further divided into divisions. The cost of the supervision is borne foremost by the supervised institutions themselves.

Austrian National Bank

The Austrian National Bank (OeNB) contributes to monetary and economic policy decision-making in Austria and in the euro area. The primary focus of the OeNB is safeguarding domestic financial stability and supplying high-quality, counterfeit-proof cash. In addition, it manages the Austrian reserve assets, that is, gold and foreign exchange holdings, draws up economic analyses, compiles statistical data, is active in international organisations and oversees payment systems and compliance with international sanctions lists. Apart from its role in banking supervision, which is to the extent that the FMA is not in charge, OeNB does not exercise any authoritative powers over capital market participants.

Austrian Control Bank

The Austrian Control Bank (OeKB) is Austria's central provider of financial and information services to the export industry and the capital market and does not exercise any authoritative powers towards capital market participants. However, issuers of securities and investment funds have to fulfil their reporting and disclosure obligations by using OeKB's electronic reporting platforms and prospectus storage systems.

OeKB's subsidiary, OeKB CSD GmbH, is the only Austrian licensed central securities depositary pursuant to the Central Securities Depositories Regulation, rendering securities account maintenance services (central maintenance service), initial recording of securities in bank-entry systems and the operation of a securities settlement system.

Takeover Commission

The Takeover Commission is an independent authority that is responsible for the enforcement of the Austrian Takeover Act, stating the obligations in connection with takeover transactions in targeted Austrian joint-stock corporations listed on an Austrian or EU regulated market. The Austrian Takeover Act stipulates, for instance, the information that must be included in the offer documents and the minimum offer period, and defines measures to prevent potential insiders from taking advantage of inside information. In particular, the Takeover Commission is responsible for monitoring the entire bidding process and assessing whether a mandatory bid is required.

iv Trends reflected in decisions from the courts or other relevant authorities

General developments regarding investor protection

There has been a general trend towards investor protection, which has been shaped by case law, particularly in the past 10 years. Furthermore, following the global financial crisis, the courts have been confronted with several other investor-related proceedings.

Extensive case law already exists on the content and scope of the advisory obligations of investment advisers. According to an Austrian Supreme Court decision in 2019, these advisory obligations depend on the nature of the particular legal transaction, of the investment model and of the person of the customer. An investor must be informed of the typical risks of the envisaged investment based on the intended investment objective and the investor's concrete risk concept. In addition, the impact of the risk content of the investment product on the investment objective pursued must be explained by the adviser. The extent of these disclosure obligations depends on the circumstances of the individual case.

An investor who acquires securities that he or she would not have acquired if he or she had received proper advice is, in principle, entitled to in rem restitution (as compensation for the real loss). However, the entitlement to in rem restitution is based on the creation of the state in nature that would exist without inaccurate advice. The sale of securities by the aggrieved party or investor does not prevent an in rem restitution for the investor.

The Austrian Securities Supervision Act 2018 stipulates that when providing investment advice investment firms must check the appropriateness or suitability of the investments (the know-your-customer concept), which corresponds to the obligation to obtain customer information (for example, on the client's knowledge, experience and financial circumstances). For this reason, the investment adviser must carry out a suitability test by obtaining information (on, inter alia, the client's knowledge and experience in relation to the product concerned and the financial relationship). In this regard, the investment adviser must also inform the client regarding possible risks involved in the investment product. The investment risk must be financially bearable for the client and, above all, must have been communicated in an understandable way (considering the client's knowledge and experience).

Prospectus liability pursuant to the concept established in the Austrian Capital Market Act derives from incorrect or incomplete information in the prospectus. According to the Austrian practice, defective (misleading, incorrect or incomplete) prospectus information can justify claims for damages if the investor proves the causality between the defective prospectus information and his or her investment decision. This causality occurs if the investor decided to buy in reliance on the prospectus known to him or her and his or her claim for damages is therefore, in fact, based on the incorrect, incomplete or misleading information contained in the prospectus.

The year in review

The Austrian economy is largely characterised by small and medium-sized companies, which contribute a considerable share of the country's economic growth, innovation, job creation and employment. However, small and medium-sized companies have completely different financing needs and structures from those of large companies. For this kind of company, the classic loan remains by far the most important financing instrument. In contrast, a certain diversity has developed in the medium-size category in recent years. However, in general, Austrian companies have traditionally been very reluctant to fund their capital needs via the capital market and it must therefore be stated that overall the Austrian economy is credit-market orientated rather than focused on the capital market.

This situation is pretty much in line with the aforementioned savings and investment behaviour of Austrian households and the low appetite for investments in securities, as investments in bonds (amounting to €30.7 billion) and listed shares account for only 7.9 per cent of total investments of Austrian households.10 It must be said therefore that Austria is much more a country of savers than of investors.

i Developments in the Austrian equity capital market

After several years with hardly any transactions, in 2019 the Austrian capital market had a temporary peak with a total of three initial public offerings (IPOs), each taking place on the prime market, VSE's premium market segment. After the market briefly flared up in 2019, there was not a single IPO in the covid-19 pandemic year of 2020. The fact that Austria does not qualify as a vibrant IPO – as well as secondary offerings – market is also demonstrated by the number of equity prospectuses approved by the Austrian regulator, with a total of five in 2020, which qualifies as the lowest number in the past five years.

In contrast to this, VSE has successfully attracted new equity listings on the Official Market, as well as on the Vienna MTF, and in particular from foreign issuers, with steadily increasing numbers till 2019, and a sharp decrease in the covid-19 pandemic year of 2020.11

Refrain from paying dividends

In light of the massive challenges presented by the economic effects of the global covid-19 pandemic, the FMA, in line with the European Systemic Risk Board, the European Central Bank and the European Insurance and Pension Fund Authority, issued a recommendation that Austrian banks and insurance companies refrain from paying dividends for the past financial year, as well as refraining from buying back their own shares. The banking supervision authorities of the European Union, which cooperate in the Single Supervisory Mechanism under the European Central Bank's lead, have decided to repeal the recommendations to refrain from the distribution of dividends, share buybacks as well as variable remuneration with effect from 30 September 2021. In the interests of ensuring fair competitive conditions in the Austrian financial and capital market on a cross-sectoral basis, the FMA will also repeal the restrictions on distributions that it had additionally extended to cover other financial service providers at the same time. Nevertheless, the FMA warn financial service providers also to continue to take a cautious and forward-looking approach to capital planning that takes into account the sustainability of their business models and the increased risk arising from economical challenges, as well as imminent losses once government assistance measures expire.

In addition to the FMA recommendation, the Austrian Ministry of Finance adopted a new ordinance relating to companies (both regulated and unregulated, thereby going beyond the scope of the recommendations addressed to banks and insurance undertakings) that make use of covid-19-state aid. Pursuant to this ordinance, an applicant for covid-19-state aid was obliged to refrain from paying dividends from 16 March 2020 until 16 March 2021 and to respect a moderate dividend and profit distribution policy for the remaining term; thereafter, a moderate dividend and profit payment policy must be followed until 31 December 2021. In addition, the applicant must not liquidate any reserves to increase its balance sheet profit; and the applicant must not use the liquidity received from the state aid:

  1. to pay profit distributions;
  2. to repurchase own shares; or
  3. to pay bonuses to management board members or managing directors.

ii Developments in the Austrian debt capital market

As in the Austrian equity capital market, overall the Austrian debt capital market environment was not very favourable in recent years. While Austrian corporates tended to use the debt capital market as a financing source in the years following the financial crisis, recent years saw a rather low level of issuances and, in fact, the number of debt prospectuses (for standalone issuances) approved by the Austrian regulator have largely stagnated in the past five years. It should, however, be strongly emphasised that there has been a stable trend in recent years of large Austrian corporates, in particular banks, insurance companies and utility providers, using the debt capital market to source their capital needs via emissions programmes, which is demonstrated by a stable and relatively high number of approved base prospectuses.

Corporate bonds versus German Schuldschein

Another trend seen in recent years is the increased popularity of the instrument of assignable loans in Austria, predominantly in the structure of the German Schuldschein, mostly structured under German law. While there is no reliable data available in relation to the numbers and volumes of these transactions (particularly because the German Schuldschein is typically structured as a private placement for institutional investors and does not qualify as a transferable security and thus, is not eligible for a stock market listing), it has to be noted that various Austrian issuers substituted their matured corporate bonds with the issuance of a German Schuldschein.

iii Developments affecting derivatives, securitisations and other structured products

Derivatives

Regarding the Austrian derivatives market, the volume of outstanding derivatives with Austrian involvement, measured in terms of gross nominal value, was around €1.266 billion at the end of 2020.12 This figure includes derivatives traded both on-exchange and off-exchange. Over-the-counter (OTC) derivatives trading predominates within the European Union. Similarly, in Austria, 21 per cent of the outstanding derivatives were traded on an exchange, compared with 79 per cent traded on an OTC basis. While options dominated the equity derivatives segment, among commodity derivatives swaps, futures or forwards predominated.

As regards the underlyings of credit and equity derivatives, the relatively small Austrian credit derivatives market is predominantly focused on European credit default indices and German corporate bonds.13

Securitisation

In securitisations, a distinction is made between true sale transactions and synthetic transactions. A true sale transaction concerns the sale of receivables from the originator (the bank) to a special purpose vehicle (SPV) that issues securities on the capital market for refinancing purposes (a traditional securitisation). The receivables portfolio is provided as collateral for the investors (asset-backed securities) and is often transferred to a collateral trustee who holds the receivables portfolio in trust for the investors. In the case of a synthetic securitisation, however, the receivables are not sold, but the credit risk contained in the receivables is transferred, mainly using (unfunded) guarantees or credit derivatives or (funded) credit-linked notes.

Nevertheless, the originator, sponsor or original lender in a securitisation must retain, on an ongoing basis, a material net economic interest in the securitisation of not less than 5 per cent (credit risk retention). Since the entry into force of the Securitisation Regulation14 on 1 January 2019, this has been applicable to securitisations by bank and insurance originators and corporate originators alike (cross-sectoral application).

iv Cases and dispute settlement

Inaccurate investment advice

In the field of capital market law, there were several court decisions with regard to claims where the investor was not properly informed about the risk. Liability claims can arise, in particular, from breaches of information obligations by investment advisers.

The case law distinguishes two groups of cases:

  1. where the investor would have invested even if he or she had received correct advice, the real damage consists in the fact that the investor bought the actually undesirable investment instead of the intended one. In this case, the investor must assert and prove his or her hypothetical investment behaviour as part of the damage; and
  2. where the investor refrained from making an investment when properly advised or invested the money only 'without risk', the unintended asset represents the real loss and questions in relation to an alternative investment do not arise.

According to another decision of the Austrian Supreme Court, an investor who acquires an investment product that he or she would not have acquired if he or she had received proper advice is, in principle, entitled to in rem restitution (as compensation for the real loss). In rem restitution means that the purchase price paid for the acquisition of the securities less interest or dividends received must be repaid to the investor concurrently with the transfer or retransfer of the securities (in the case of purchase) or the lost proceeds of the sale must be compensated for (in the case of sale). In general, the development of the desired alternative investment must also be taken into account.

According to another recent Austrian Supreme Court decision, the investor must prove not only the fact that he or she would not have acquired the securities actually subscribed to if he or she had been correctly informed, but also the choice of a hypothetical alternative investment in the case of correct information, and its development. This only applies subject to the condition that the investor would duly have made an investment if given proper advice, which is normally assumed in a preconceived investment decision. Conversely, if the investor would have used the available money differently if he or she had received proper advice, the burden of proof and assertion imposed on the investor does not apply.

Ad hoc publicity

Furthermore, claims for damages under civil law may also arise as a violation of protective laws, and thus criminal law norms also allows compensation claims for financial losses. In this regard, the Austrian Supreme Court ruled in a decision in 2015 that the obligation under the Austrian Stock Exchange Act to disclose inside information (ad hoc publicity) is designed to protect the confidence of investors in the accuracy and completeness of the information required under the Austrian capital market laws. The Austrian Supreme Court stated in this decision that, to claim for damages, the investor's decision to purchase certificates must have been based on the untrue or omitted publication of inside information.

Outlook and conclusions

i Cross-Border Distribution of Funds

The Cross-Border Distribution of Funds Directive (CBDF)15 shall be implemented in Austria by a federal act that amends the Austrian Alternative Investment Fund Managers Act, the Austrian Real Estate Investment Fund Act and the Austrian Investment Fund Act 2011. The Local Implementation Act has not yet been promulgated as a law and is still under consultation. The aim is to reduce regulatory barriers to cross-border distribution by removing unnecessarily complex requirements and by increasing transparency, in consideration of the protection of investors. The draft Local Implementation Act includes the new regime for 'pre-marketing' that, on behalf of an AIFM licensed in Austria or in another Member State, may only be carried out by certain authorised companies, provided that they comply with the pre-marketing provisions. Under the Implementation Act, EU AIFMs shall ensure that professional investors do not acquire units or shares in an AIF through pre-marketing. Investors contacted through pre-marketing may acquire shares in the AIF only after the required notification of marketing. However, if a subscription is made within 18 months of the EU AIFM having begun pre-marketing, this is considered to be the result of marketing and thus also requires the notification of marketing.

ii New Mortgage Bonds Act

In transposition of Directive (EU) 2019/2162 on the issue of covered bonds and covered bond public supervision (Covered Bond Directive), a new Austrian Mortgage Bonds Act will replace the existing Austrian legislation in this field, comprising the Austrian Mortgage Bank Act, the Austrian Act on Pfandbriefe and Related Bonds of Public Credit Institutions and the Austrian Act on Covered Bank Bonds, to harmonise these three acts in terms of content. The new Austrian Mortgage Bonds Act is intended to ensure that all types of covered bonds can be issued in the future.

iii BRRD II retail regime

As with other EU Member States, BRRD II implementation further restrains Austrian bank issuers from distributing certain categories of bonds to retail clients. This follows international developments placing various restrictions on the distribution of subordinated bonds to retail clients and is intended to allow for the smooth application of statutory bank resolution tools. At the same time, this is expected to possibly foster bank (non-retail) issuance activity in a syndicated format. Furthermore, there are restrictions on the selling of eligible liabilities of 'senior non-preferred' status (Article 108 (2) of the BRRD) to retail clients. These restrictions are set out in the Austrian Act on the Recovery and Resolution of Banks and include, among others, the requirement that the seller must perform a suitability test in accordance with MiFID II. BRRD II was implemented in May 2021.

Footnotes

1 Martin Zuffer is a partner at CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH.

2 As defined in Article 2(d) of the Prospectus Regulation (EU) 2017/1129.

3 Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.

4 Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC.

5 Defined in the Austrian Capital Market Act as 'property rights for which no securities are issued, arising from the direct or indirect investment of capital of several investors for their collective account and collective risk or for the collective account or risk together with the issuer if the management of the capital invested is not overseen by investors themselves'.

6 While the Austrian Capital Market Act defines various institutions eligible to be a prospectus auditor (inter alia, banks and financial institutions, subject to certain criteria), in practice, such prospectus audits are predominantly performed by a certified external auditor or an external auditing company.

7 The Markets in Financial Instruments Regulation (MiFIR); Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012.

8 Austrian Financial Market Authority (FMA), Facts and Figures, Trends and Strategies 2020.

9 Oesterreichische Nationalbank, Financial Stability Report 41 dated June 2021.

10 Oesterreichische Nationalbank, press release dated 22 October 2019.

12 ESMA Annual Statistical Report on EU Derivatives Markets 2020.

13 FMA, Annual Report 2020.

14 Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012.

15 Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019, amending Directives 2009/65/EC and 2011/61/EU with regard to cross-border distribution of collective investment undertakings.

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