Some German retail investors in the Austrian trend-following Quadriga hedge fund, could qualify for compensation for losses from the fund.
Lawyers have suggested some may have bought certificates linked to the fund via online marketing companies without the regulatory license to sell hedge fund-linked products.
Quadriga, which denies the claims, last year caught the eye of the US regulator, the Securities and Exchange Commission (SEC), which asked the firm to stop labelling one of its products a 'hedge fund' for marketing in the US.
In the latest development it is alleged that Dima24 and Finanzoptimierung.de distributed the fund certificates without holding appropriate licences from German authorities, according to lawyers Hans Peter Grieschen and Cornelius Knappmann Korn.
Matthias Knabb, editor of German hedge fund website www.opalesque.com, said such problems could be overcome by proposed German legislation set to allow distribution and marketing of hedge funds in Germany.
Germany's secretary of state, Barbara Hendricks has confirmed that hedge fund regulations that Germany's Finanzministerium announced earlier this year will be promulgated by February 2004.
Laws preventing hedge funds from setting up in Germany, and punitive taxes on German hedge fund investors, have historically hindered development in the German hedge fund market.
'The new rules should make matters transparent and clear and this Quadriga matter was one of the last irregularities and difficulties of the current state of affairs,' Knabb said.
l For more information on the proposed regulations see the German document on Germany's Investment Law 2003 at www.bundesfinanzministerium.de/Anlage17309/Eckpunktepapier-Der-Finanzmar ktfoerderplan-2006.pdf.
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