On 20 May 2021, the Bundestag passed the Financial Market Integrity Strengthening Act (FISG) in the version recommended by the Finance Committee. The law came into force in July, although transitional provisions apply to some regulations. The most important aim is to improve balance sheet control for companies and thus strengthen confidence in the German financial market in the long term. To this end, it contains innovations in the following areas:
Find out on this page what is important for you now and what you should pay attention to.
This is new for the area of corporate governance
The changes in the area of corporate governance may be of particular interest to board members and supervisory board members.
Establishment of an audit committee with financial experts and the right to information:
One of the most important changes: Public interest entities (capital market-oriented companies, banks and insurance companies) must now set up an audit committee, which must be composed of at least two financial experts, one of whom must have expertise in the field of accounting and the other in the field of auditing. The members of the audit committee have a direct right to information from the heads of those central departments of the company that are responsible for the tasks relating to the audit committee.
Corporate control systems:
To strengthen corporate governance, the establishment of an appropriate and effective internal control system and risk management system is also mandatory in listed companies. The explicit obligation to set up a system suggests a higher degree of formalisation, which must be determined and designed individually for each company.
Monitoring the quality of the audit:
It has also been clarified that the supervisory board or audit committee must monitor the quality of the audit.
This is new for the final audit area
External rotation of the auditor:
An important innovation is the reduction of the maximum mandate term for the audit of all public interest entities to ten years; the extension options for capital market-oriented companies no longer apply. In credit or financial services institutions and insurance companies that are not public interest entities, a new auditor must now be appointed if the Federal Financial Supervisory Authority (BaFin) has been notified of the same auditor for eleven consecutive financial years. In these cases, BaFin can demand the appointment of a different auditor.
Internal rotation of the responsible audit partners:in:
The internal rotation period for audit partners responsible for the audit of public interest entities is reduced from seven to five years.
Provision of non-audit services:
The provision of tax advisory and valuation services by the auditor will no longer be possible in public interest entities in future. Similarly, the Auditor Oversight Authority (APAS) no longer has the authority to allow the auditor to exceed the 70 per cent fee cap for advisory services in relation to audit services for a financial year upon request.
This is new for the area of enforcement proceedings
The two-stage enforcement procedure will be converted into a one-stage procedure for which BaFin is responsible.
