Securities trading companiesInformation about the assignment of securities trading companies to the EdW
Since 1998, all securities trading companies have been required by law to secure their liabilities from securities transactions through membership of a compensation scheme.
A separate "Application for admission to EdW", however, does not need to be submitted. In accordance with section 16 (1) of the WpIG or section 32 (3) of the KWG (German Banking Act), BaFin (German Federal Financial Supervisory Authority) notifies EdW when a company submits an application for a license pursuant to section 15 (1) of the WpIG or section 32 (1) sentence 1 of the KWG, thereby providing EdW with the opportunity to state its opinion with regard to the application. In addition, BaFin allows EdW to view the applications and determine the extent of the risk of occurrence of a possible compensation case if authorization is granted or extended.
The notice about the assignment to EdW will be given to the securities trading company by BaFin according to section 16 (1) of the WpIG or section 32 (3a) of the KWG.
After BaFin has granted a securities trading company authorization to conduct banking or financial services, EdW is informed of the fact by BaFin. On the day authorization is granted, the securities trading company is assigned to EdW. The institutions then receive comprehensive information on statutory investor compensation and related obligations.
The legal requirements for contributions are laid down in a contribution ordinance (EdWBeitrV). You can find the EdWBeitrV in our online library.
The EdWBeitrV in determining the amount of one-off payments and annual fees takes into account the scope of authorization of the assigned institutions and their powers with regard to the different levels of risk that a compensation event could occur. The contribution rates are graduated according to risk.
Securities trading companies that are newly assigned to EdW must in addition to the annual fee make a one-off payment. The amount of the one-off payment is equal to the initial annual fee. Following assignment the minimum contribution is charged, which depending on the scope of the authorization will be EUR 1050, EUR 2100, EUR 4200 or EUR 6300 respectively. This minimum contribution is then deducted from the one-off payment. The one-off payment is collected with the first annual fee.
Securities trading companies must pay their annual fee on 30. September of each year.
The annual fee is determined by the scope of the authorization to provide banking and financial services and is 1.23%, 2.46%, 3.85% or 7.7% of gross commission income and gross income from financial transactions, respectively, but no more than 10% of annual net income. The minimum annual fee is EUR 1050 for institutions that do not have access to client funds/securities, and EUR 2100 for institutions with authority to access customer funds/securities.
Furthermore, there are possible risk-based surcharges and deductions.
The profits for the measurement of the annual fee can be reduced under section 2 EdWBeitrV if the institution requests this in time and the figures can be confirmed by an auditor or audit firm.
A discount may be granted on the annual fee if by the specified deadline the institution provides proof of fidelity insurance under the provisions of section 2d EdWBeitrV.
Pursuant to section 2c EdWBeitrV, a graduated customer-structure surcharge of 10%, 15% or 20% is added to the annual fee if the institution has more than 1,000, 5,000 or 10,000 customers eligible for compensation respectively.
Special contributions and special payments
If EdW does not have sufficient existing funds (one-off payments and annual fees) to compensate investors, EdW will levy special contributions and/or take out loans. EdW may require institutions to make adequate special payments for the payment of interest and repayment of loans, subject to the approval of BaFin.
The regulations for the special contributions and special payments are structured on the basis of section 8 AnlEntG in sections 5 to 5b EdWBeitrV.