Definition and Legal Classification of Structured
The term Structured (German: “strukturiert”) is relevant in various legal contexts and is primarily used in the fields of finance, corporate, and data protection law. Generally, “structured” refers to the deliberate organization, systematization, or design of information, financial products, data, or contractual relationships. Legally, structured processes and products serve to ensure compliance with statutory requirements, provide transparency, and manage risks.
Structured in Financial Law
Structured Finance
Structured Finance describes forms of financing that use special financial instruments and structures to offer tailored solutions for complex financing needs. Claims, assets, or future cash flows are pooled and assigned to special legal entities (Special Purpose Vehicles, SPV). Common forms include Asset-Backed Securities (ABS), Collateralized Debt Obligations (CDO), and structured corporate loans. This structuring serves purposes such as risk distribution, liquidity procurement, and compliance with regulatory capital requirements (e.g., under Basel III).
Legal Framework
The design of structured financial products in Germany and Europe is subject to extensive statutory regulations, in particular through the Capital Investment Code (KAGB), the European Securities and Markets Authority (ESMA), and the Markets in Financial Instruments Directive (MiFID II). Special requirements exist with regard to information duties, investor protection, risk diversification, and the admission of products for trading.
Structured Notes and Structured Bonds
Structured Bonds or Structured Notes refer to debt securities where repayment and interest claims are linked to the performance of underlying assets (such as shares, indices, commodities, or currencies). They combine fixed-income investment components with derivative elements. Legally, they are securities pursuant to Section 2 subseq. 1 WpHG, to which specific prospectus and information obligations under the Securities Prospectus Act (WpPG) and EU Prospectus Regulation apply.
Contract Structuring and Consumer Rights
Investors have the right to be informed and advised under the Securities Trading Act. Providers are obliged to present the structure, risks, and costs of products transparently. Violations can lead to claims for injunction and damages.
Structured in Corporate and Contract Law
Structured Arrangements and Organizational Design
In corporate law, the term is often used in connection with Structured Arrangements This refers to contractually and organizationally well-defined forms of cooperation between companies, for example in framework agreements, joint venture structures, or through holdings. The aim of structuring is the efficient allocation of rights, obligations, and risks, as well as fiscal and liability optimization.
Relevant Legal Provisions
Legal foundations derive from the German Civil Code (BGB), Commercial Code (HGB), and the respective special laws (AktG, GmbHG). Notably, co-determination, compliance, accounting, and international tax regulations (e.g., double tax treaties) must be observed.
Structured Data and Data Protection Law
Structured versus Unstructured
In data protection law, Structured Data refers to data processing where personal data are collected, stored, and processed in specified, usually digital formats (such as databases or spreadsheets). This contrasts with unstructured data (e.g., free text, emails).
Data Protection Law Particularities
The General Data Protection Regulation (GDPR) defines the term “filing system” (“structured set of personal data”) in Art. 4 para. 6, and provides for extended rights of access, rectification, and erasure for structured data. Data controllers must implement and document directory structures, access controls, and verification processes. With structured data sets, the obligations under Art. 15 ff. GDPR can often be fulfilled more easily and securely.
Structured Litigation and Dispute Resolution
Structured Legal Proceedings
Structured Litigation describes concepts for procedural management in civil proceedings that contribute to an orderly and efficient dispute resolution. Examples include pre-trial conferences, advance sorting of evidence, structured settlement negotiations (mediation, arbitration), or separate procedures for mass litigation (class actions, model declaratory actions pursuant to Section 606 ZPO).
Legal Requirements and Objectives
Structured procedural workflows are intended to ensure compliance with the right to be heard (Section 103 GG), procedural efficiency, and effective legal protection. Judicial instructions and procedural schedules are based on Sections 139, 273 ZPO.
Structured in International Legal Systems
Structured approaches are also applied beyond German law. In Anglo-American jurisdictions, especially in finance and corporate law, terms such as “structured products” and “structured transactions” are used. There, supplementary provisions of the U.S. Securities and Exchange Commission (SEC) and international standards such as Basel III and IFRS apply.
Conclusion and Relevance for Legal Practice
The term Structured is a central umbrella term for the targeted organization, transparent design, and legally compliant implementation of various matters and products in law. Whether in the development and marketing of complex financial instruments, in the structuring of corporate entities, in data protection, or in civil proceedings – structured approaches and their comprehensive regulation ensure planning reliability, risk control, and compliance with legal requirements.
Accordingly, any legal assessment must examine whether and how structures facilitate legal requirements, and in which areas legislative provisions mandatorily require specific “structuring.”
Frequently Asked Questions
Who is liable for errors in the creation of structured financial products?
For errors in the conception, distribution, or documentation of structured financial products, both the issuers and, if applicable, the distributing companies are liable. According to the relevant laws, in particular the Securities Trading Act (WpHG) and the EU Prospectus Regulation, the issuer is obliged to provide complete and correct information. If significant risks, functionalities, or return opportunities are presented incorrectly, incompletely, or misleadingly, investors may have claims for damages. In addition, advisory errors—such as inadequate risk disclosure by banks or financial advisors—can give rise to liability, whereby in Germany Section 280 BGB (“breach of contractual duties”) and Section 823 BGB (“tortious act”) are to be considered. Regulatory sanctions may also be imposed in cases of systemic or gross deficiencies.
What legal requirements apply to the prospectus obligation for structured financial products?
Structured financial products are generally subject to the prospectus obligation under the EU Prospectus Regulation (Regulation (EU) 2017/1129) and supplementary national provisions such as the Securities Prospectus Act (WpPG). The prospectus must contain all information essential for the assessment of the product by potential investors, in particular regarding risks, structure, issuer information, and expected returns. Exceptions may apply to products aimed solely at qualified investors or those below certain volumes. Approval of the prospectus by the Federal Financial Supervisory Authority (BaFin) or the relevant authority of another EU Member State is a mandatory requirement for public offerings. Amendments (“supplement obligation”) must regularly be made if the risk profile or product changes.
What obligations for risk disclosure exist in the distribution of structured products?
In the distribution of structured financial instruments, there is an extensive obligation for risk disclosure under Section 63 WpHG. The distributor is required to inform the customer in a clear, complete, and individualized manner about the function, risks (such as total loss risk, market risks, issuer risks, termination or liquidity risks), as well as cost structures and the off-exchange nature of such products. In particular, the information obligations must also cover the suitability of the product with respect to the investment objectives and knowledge of the client (keywords: suitability and appropriateness tests). Breaches of these obligations may entitle the client to claim damages and can lead to regulatory consequences up to a sales ban.
How are structured products legally distinguished from investment funds or other financial instruments?
Legally, structured products constitute debt securities or derivatives with combinations of several underlying assets. They differ from investment funds in that they generally do not represent segregated assets, but bearer bonds—that is, investors are creditors of the issuer and, if in doubt, also bear its insolvency risk (issuer risk). Investment funds, on the other hand, are set up as segregated assets protected from the issuer’s access (Section 92 KAGB), which is not the case for structured products. Additionally, legal requirements regarding disclosure, approval, and distribution differ: for funds, specific rules under KAGB and UCITS apply, while for structured products, the provisions of the WpHG, the Prospectus Regulation, and the respective special laws for derivatives and securities apply.
Are there specific investor protection mechanisms for structured financial products?
Legal investor protection for structured products primarily consists of transparency requirements, prospectus obligations, and advisory standards. Legal regulations require a clear and understandable presentation of all risks and costs (e.g., in the form of key information documents under the PRIIPs Regulation). Issuers and distributors are also subject to strict supervision by regulatory authorities (e.g., BaFin). Mechanisms such as deposit insurance or investor compensation generally do not apply, as these involve bearer bonds rather than bank deposits. In cases of advisory errors or prospectus deficiencies, investors may take legal action against the issuer or distributor.
What supervisory requirements does BaFin impose on structured financial products?
In the course of its supervisory activities, BaFin examines whether issuers comply with the requirements of the EU Prospectus Regulation, the WpHG, and further special legal regulations (e.g., the PRIIPs Regulation). This includes in particular the proper preparation, approval, and publication of securities prospectuses, as well as compliance with product governance and distribution rules. In the case of violations, BaFin can impose measures such as sales bans, fines, or prohibitions. Under its product intervention powers, BaFin can also exclude certain products from distribution or publish warnings.
What are the tax implications to consider from a legal perspective?
From a legal perspective, structured products are subject to various tax regulations, particularly regarding income recognition, withholding tax, and capital gains tax in Germany. Profits from structured products are generally treated as investment income under Section 20 EStG and are subject to capital gains tax. Complexity often arises in the tax treatment of derivative components, barriers, bonus elements, or upon repayment. Additionally, the issuer has certain reporting and documentation obligations to meet tax requirements. Investors are required to declare their investment income accordingly; errors or omissions can result in additional demands or criminal consequences.
