Facts you should know when investing capital

Here you can learn about the principles of the disassociation of the (former) grey capital market to the organized capital market. Even if it sounds like dry theory: These facts may be worthwhile for you!

Capital market and Capital market law

The name "capital market" is a general term for all markets that serve the commercial intercourse of supply of and demand for (financial) capital. At this, we differentiate between the primary, secondary and "grey" capital markets.

Capital market law is a general term for the laws that govern the market.

What was the grey capital market?

Concerning this, we cite (a translation) from the "Handbuch Rund um's Geld" (The Handbook about everything to do with money) by the "Stiftung Warentest: "As grey capital market, we identify the part of the financial markets that do not underlie state supervision or other regimentations. The offers thus do not appear on the stock exchange or in branch banks but are offered by phone or in the investor's living room: in this case, he should really be seen as a victim, as the majority of offers on the grey market are dubious. According to the Federal Criminal Police Office, an estimated 40 to 50 billion DM per year trickles into the channels from dubious providers."

Since the crisis of the New Economy, more and more supervisory regulations and a prospectus obligation have been introduced even to this field of the capital market. Due to the Market in Financial Instruments Directive - the so-called MiFID and the Financial Market Regulations Implementation Law (FRUG, in force since 1st November 2007), many services were put under the supervision of the BaFin. Thus, investment advising now belongs to commercial paper services. Rendering the service thus requires authorization. In addition, there have been regulations on the duty to inform when rendering commercial paper services since then. Whether the "grey market" has completely disappeared since then - that is something the next years will show.

What is the organized capital market?

By this, we understand the part of the financial markets that take place under state supervision or under other traceable, public regulations. The classical emporium is the stock exchange. Products of the organized capital market are, for example, shares, equity funds, property funds (as long as they are traded on the stock exchange), exchange traded funds, capital life insurance, cooperative shares, subscription warrants.
Legal issues concerning the organized capital market are treated in many special laws like the Companies Act, the Stock Exchange Act, the Financial Market Development Act, the Securities Trading Act but also in the German Civil Code.

Examples of typical offers of the grey capital market:
Examples of typical offers of the grey capital market: Participations saving schemes and the tax advantages of all kinds combined with them, building project models, property scheme projects, timesharing, debt financing pension schemes, gambling participations, diamond trade, option trading, penny stocks, bank guarantee business, so-called "English life insurances"...

Here you can find a Check list to download (PDF), with which you can recognize dubious capital investments

Here you can find a List of companies that attracted negative attention in the past

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