AIFMD: New Pre-Marketing Rules

Corporate Alert | July.24.2019

On July 12, 2019, the following new EU directive and regulation on cross-border distribution were published in the Official Journal of the European Union:

  • the Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019 amending Directives 2009/65/EC and 2011/61/EU ("AIFMD") regarding cross-border distribution of collective investment undertakings ("Directive 2019");
  • the Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 ("Regulation 2019") on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) no. 345/2013, (EU) no. 346/2013 and (EU) no. 1286/2014.

The Directive 2019 and Regulation 2019 introduce a new regime for investment funds with the aim to: eliminate current regulatory barriers to the cross-border distribution of funds, improve transparency by aligning marketing requirements and fees, harmonize national rules for the verification of marketing material by national authorities, enable ESMA to monitor investment funds and allow to pre-market a fund.

The Directive 2019 introduces an important new concept in AIFMD: a harmonised definition of pre-marketing for the Alternative Investment Fund Manager ("AIFM") and Alternative Investment Fund ("AIF").

"Pre-marketing" means provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or with a registered office in the Union in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing in accordance with Article 31 or 32 [of AIFMD],in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF or compartment.

Directive 2019 notably includes Article 30a – inserted at the beginning of Chapter VI of AIFMD – which sets forth the conditions for pre-marketing in the European Union by an EU AIFM.

Key elements of pre-marketing

who

  • EU AIFM or entity on its behalf.

subject matter

  • Provision of information or communication, direct or indirect, on investment strategies or investment ideas to test the interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing.

type of investors

  • Potential professional investors domiciled or with a registered office in the EU.

where

  • Across Member States.

notification procedure

  • Within 2 weeks of it having begun pre-marketing, EU AIFM sends an informal letter to the competent authorities of its home Member State;
  • the competent authorities of AIFM home Member State inform the competent authorities of the Member States in which the EU AIFM is or was engaged in pre-marketing.

Note: EU AIFM is not required to notify the competent authorities of the content or of the addressees of pre-marketing before it engages in pre-marketing.

exclusions

No pre-marketing is allowed where the information presented to potential professional investors:

(a) is sufficient to allow investors to commit to acquiring units or shares of a particular AIF;

(b) amounts to subscription forms or similar documents whether in a draft or a final form; or

(c) amounts to constitutional documents, a prospectus or offering documents of a not-yet-established AIF in a final form.

Where a draft prospectus or offering documents are provided, they shall not contain information sufficient to allow investors to take an investment decision and shall clearly state that: (a) they do not constitute an offer or an invitation to subscribe to units or shares of an AIF; and (b) the information presented therein should not be relied upon because it is incomplete and may be subject to change.

CAuTION SIGN

Any subscription by professional investors, within 18 months of the EU AIFM having begun pre-marketing, to units or shares of an AIF referred to in the information provided in the context of pre-marketing, or of an AIF established as a result of the pre-marketing, shall be considered to be the result of marketing and shall be subject to the applicable notification procedures referred to in Articles 31 and 32 of AIFMD.


By August 2, 2021, Member States shall adopt and publish the national laws, regulations and administrative provisions necessary to comply with the Directive 2019.

The Regulation 2019 sets out the new regulatory framework to promote and facilitate cross-border fund distribution.

Regulation 2019 – Summary of key provisions

subject matter

  • Rules on the publication of national provisions concerning marketing requirements for collective investment undertakings and on marketing communications addressed to investors;
  • principles concerning fees and charges levied on managers of collective investment undertakings in relation to the cross-border activities;
  • establishment of a central database on the cross-border marketing of collective investment undertakings.

scope

Regulation 2019 shall apply to:

  • alternative investment fund managers;
  • UCITS management companies;
  • EuVECA managers; and
  • EuSEF managers.

marketing requirements for
collective investment undertakings

  • National Competent Authorities shall publish and maintain on their websites up-to-date and complete information on the applicable national laws, regulations and administrative provisions governing marketing requirements
  • National Competent Authorities shall notify to ESMA the hyperlinks to the website;
  • by February 2, 2021, ESMA shall develop draft implementing technical standards to determine standard forms, templates and procedures.

It shall apply from August 2, 2021.

marketing communications
addressed to investors

  • All marketing communications addressed to investors are identifiable as such and describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner, and that all information included in marketing communications is fair, clear and not misleading;
  • by August 2, 2021, ESMA shall issue guidelines on the application of the requirements for marketing communications.

fees or charges

Where fees or charges are levied by competent authorities for carrying out their duties in relation to the cross-border activities, such fees or charges shall be consistent with the overall cost relating to the performance of the functions of the competent authority.

It shall apply from August 1, 2019.

ESMA central database
on national provisions
concerning marketing requirements

By February 2, 2022, ESMA shall publish and maintain on its website a central database containing the summaries of marketing requirements for collective investment undertakings and the hyperlinks to the websites of competent authorities.


The Regulation 2019 will apply from August 1, 2019, with the exception of Articles 4, paragraphs from (1) to (5), Articles 5 paragraphs (1) and (2), Article 15 and Article 16, which will apply from 2 August 2021.