The German Regulatory Authority for Securities Trading (Bundesaufsichtsamt für den Wertpapierhandel) has issued a draft ordinance prohibiting cold calling. Pursuant to this ordinance, firms conducting investment services (eg the acquisition and disposal of securities for customers or the brokering of such transactions) are prohibited from telephoning potential customers to market their services, in particular, by urging such customers to buy or sell shares, for example, if the customer has not expressly requested such a call.
The reason put forward by the Regulatory Authority for issuing the ordinance is that the Authority is empowered by the German Securities Trading Act to prohibit advertising in order to counteract undesirable developments in the provision of investment services. Cold calling is regarded as advertising within the meaning of this Act. Advertising is regarded as undesirable, if it impairs or jeopardizes the orderly conduct of investment business. The purpose behind the rules of conduct contained in the Securities Trading Act (which enacted the Investment Services Directive (93/22/EEC) into German law) is to put the customer into a position where he or she is able to assess the significance, risk and economic consequences of entering into a particular investment transaction. As a consequence, the rules of conduct provide that a potential investor must be furnished with adequate information for him/her to make an informed decision. Cold calling according to the Regulatory Authority, however, runs counter to this concept. Cold calling surprises the customer, and the caller uses this element of surprise to the customer's disadvantage. Furthermore, the caller is trained to avoid material questions asked by the customer and the customer is not able to seek the necessary information he requires to make an informed decision on account of the pressure asserted by the caller. The interests of the customer are thus not safeguarded. Cold calling is not prohibited in relation to customers where investment is part of their business.
The Regulatory Authority's ordinance, only in fact enforces the current law in Germany. Thus, although the Regulatory Authority's ordinance only applies to firms carrying on investment business within the meaning of the Securities Trading Act, firms carrying out other business, such as insurance and banking, should note that cold calling is prima facie not permissible in Germany in any event, unless the targeted person has given express or implied consent. One of the main reasons for this is that cold calling is considered to be a nuisance, harrassment, and psychological pressure which impairs the customer's freedom of decision and choice. This basic rule applies not only to telephone calls, but also to sending promotions by telex or fax, although with regard to these two means of sending material, the rules under certain circumstances need not always be so strictly applied.