Buying 'Fonds' in Germany as Americans

A couple years ago my bank told me they couldn't sell me any Fonds that invested in the USA for tax reasons.

Today my bank told me they cannot sell me ANY fonds or any give me any financial advice on an investment option that might carry a risk.

He said this was an American law. How can an American law be applicable in Germany? Does anyone here work in finance and can explain this load of BS?

It MIGHT be becasueAmerican Citizes are liable to file a tax return with the Revenue even if they are non-resident.

BUT I suspect your bank is bullshitting becasue they can't be bothered.
I have had to persuade very sloely and in simple words to the Sparkasse before that Britainisineed in the EU.

Ask for the information in writing.

Regarding the ADVICE issue, there MIGHT be some truth in that depending on whether they sell only their own products or products of several competing financial institutions and their own question of liability.

Thanks MT, but it can't be because of the tax issue, since they can sell fixed interest thingies.

I don't think it's that they can't be bothered - I was in the process of buying a fund (and have owned them before) when this came up.

I will ask for this in writing - but it has come up with the postbank as well as the dresdner.

What does the advice issue for other products have to do with US law? That's what freaks me out. Are they going to tell the Germans that US citizens in Germany can't drink beer until they are 21 now?

i am a complete novice here, but i have a saving plan in germany which consists of DAX funds. i once had to fill out a W4 (help butterbean!) which consors sent to me saying it was a requirement for all u.s. citizens. i do belive it is high risk fund (rating 4 out of 5). i always want to sit down and figure this sh*t out...

Your banks either bullshitting you or there's been a misunderstanding (probably the latter).

There's no reason you can't own funds that invest in the U.S. If you are a German resident and U.S. citizen, German banks are required to take down your social security number and you have to fill out a form which permits the bank to send information to the IRS about any taxable income you earn from your German based investments in the U.S. If you don't do that, they won't let you invest in U.S. stocks, funds, etc. (If you're filing a U.S. tax return, you shouldn't care about this.)

The other point that was also mentioned here is that you have to fill out a form which advises the bank of your risk profile. Funds and investments in general are risk rated in Germany (1 to 5 I believe). You tell the bank what amount of risk you are willing to accept and they in turn will only sell you or advise you on investments within your risk category. German law requires this so that people cannot be pushed into risky investments that do not match their risk profile. So it could be that you already filled out the form and chose risk category "1" (or the bank chose it for you) and that's why the bank will not talk to you about (stock) funds because they're higher than risk class 1 which is probably reserved for fixed income investments like German government bonds etc. U.S. stock funds are probably rated as "riskier" than German or European stock funds because you've also got a currency risk as your portfolio is denominated in Euros.

Ask the bank about the risk profile and the IRS form. One of those is probably the reason they won't let you buy the funds.

Well, It can't be the IRS, I have other investments and accounts though the bank. He said something about the US regulatory authorities - but I called and asked for it in writing. He seems pretty keen to find out what's going on as well since I am not the only american customer there.

In order to be able to buy investments in Germany that invest in U.S. assets, you are required to fill out a form giving the bank your social security number etc.

If you do not do this, you can still buy investments that do NOT invest in U.S. assets, i.e. DAX funds, Dutch government bonds or anything else that contains no exposure to the U.S.

You see, the U.S. can only impose the requirement based on investments in U.S. assets (i.e. assets traded on American exchanges). Since you are a citizen and are indirectly trading on U.S. exchanges they can require this (apparantly). They cannot however force foreign banks to report to them your income from foreign based investments. I bet that if you just fill out the required form, they'll let you buy all you want.

As I said before, if you regularly file a U.S. tax return and are generally honest, signing the form doesn't affect you in the least.

I agree with Ketchup - they are either bullshitting you, there are additional administrative reporting requirements that they've determined they don't want to bother with, or someone at some level just doesn't understand the law.

I read this ttile as "Buying Friends" oh my did I have some good responses for the A desperate American

Alas when I read the thread I saw that I had nothing worthwile to add!

Hmm.. somehow some lines have been crossed somewhere...
I'm an American and worked as a financial advisor in Munich for 3 years.

Ketchup is completely right in that you need to give your SS number and fill in a W-4 to allow the bank or fund company to report your earnings to the IRS. This applies to all "allowed" investments (keep reading...).

The actual regulation I believe DDBug's bank is talking about, however, is that banks and investment companies are not allowed to sell American citizens or foreigners who are residents in the USA any investments that are not approved for sale in the USA. Example: as an American you can very well buy shares of the Templeton Growth Fund, Inc. in Germany, however, you cannot buy shares of the very similar Templeton Growth Fund (EUR). Because, you guessed it, the sister fund in Euros is not approved for sale in the USA.

I suppose the words "can" and "cannot" here are also misleading: the point is that the banks or investment companies are not allowed to sell them to you. If you have, say, an online depot... well, who's to say what you can or can't buy... And as long as you report your interest/capital gain earnings in your yearly tax filing, I would think there shouldn't be any problems.

This regulation went into effect about 2 years ago. It holds for funds; buying individual stocks is not a problem, as well as individual bonds and other interest-bearing investments.
If you have an investment account already, try asking your bank for an online option so you can trade whenever you like; get your advice elsewhere! If you don't already have an investment account, you can try to open one either online or at a bank and hope that that particular institution isn't very nitpicky... Or open an online investment account in the States and see the thread about cheap money transfers...
Good luck!

So, is this regulation a German regulation? And if not, why on earth are Germans subject to American regulations? This is what kind of freaks me out (and no, my bank still hasn't provided me with this is writing, though they did offer the online solution, saying they weren't allowed to give me advice directly).

DDBug, my bf is working in fonds, I'll ask him.

btw - I finally approached the guy at the bank Friday. Apparently he thought he'd phoned me with his newest information.
Anyway, of course it's ok for him to advise me and sell me funds because my country of residency is not the USA. (duh) But because employees in Germany are personally liable if there were to ever be a complaint / lawsuit he was erring on the side of caution - even if it meant him losing commissions. I can understand that as well. So - anyone want to recommend a sure fire fund

Hey everybody, does anybody have any new information concerning this topic? I switched to a new bank and spent a couple hours perusing through the various fund options they have. They would happily sell me the funds, however, if I read the actual prospectus, all of them state they are not for sale to US citizens. My previous bank went around the restriction by specifically searching for funds registered in the US ... however as I would like to invest on a EUR basis these funds are not very common...

I would be thankful for any information!

I cooperate as a broker with one bank that has found a way so that they can offer the full variety of funds available in Germany also to residents with US citizenship. It is the Augsburger Aktienbank and I can only recommend them, they are very friendly and all... and they offer accounts where you can invest in stocks and bonds and in investmentsfunds (plus they offer you immideately a credit-line as a certain percentage of your assets in the account so that you need not sell anything at a bad time when you just need cash for a short while). You can work directly with them or through a financial advisor like me...

Cheerio