New EU cross-border distribution rules published in the Official Journal

The texts of a new Directive ((EU) 2019/1160)) and a new Regulation ((EU) 2019/1156)) have been published in the Official Journal on 12th July 2019. The purpose of the Directive and the Regulation is to harmonise marketing rules across the EU and in particular, the concept of pre-marketing.

The new rules will mostly apply to EU-authorised AIFMs marketing their funds under the AIFMD marketing passport. The new rules do not apply to non-EU AIFMs marketing funds in the EU under the AIFMD national private placement regime.

The Directive introduces rules concerning the pre-marketing of AIFs and introduces a new definition of “Pre-Marketing”. Under the Directive, ‘Pre-Marketing’ means the “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, 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”.

Authorised EU AIFMs will be allowed to engage in pre-marketing in the EU without having to submit passport notifications. In order to be able to do this, EU AIFMs are required to ensure that the information presented to professional investors must NOT:

  • be sufficient to allow investors to commit to acquiring units or shares of a particular AIF;
  • amount to subscription forms or similar documents whether in a draft or a final form; or
  • amount to constitutional documents, a prospectus or offering documents of a not-yet-established AIF in a final form.

Additionally, “where a draft prospectus or offering documents are provided”, such documents must not contain information sufficient to allow investors to take an investment decision. These documents must clearly state:

  • they do not constitute an offer or an invitation to subscribe to units or shares of an AIF; and
  • the information presented therein should not be relied upon because it is incomplete and may be subject to change”.

Other rules concern local facilities for AIFs and UCITS being marketed to retail investors, provisions for the de-notification of marketing arrangements made for the marketing of units or shares of AIFs within EU Member States and notifications concerning marketing of an EU AIF or UCITS in Member States.

The Regulation contains requirements concerning marketing communications and places obligations on national competent authorities such as the requirement to publish and maintain on their websites up-to-date and complete information on the applicable national laws, regulations and administrative provisions governing marketing requirements for AIFs and UCITS.
Although the Directive and Regulation entered into force on August 1, 2019, the Articles of the Regulation applicable to firms will apply from 2nd August 2021. The Directive must be implemented by Member States from 2nd August 2021.

Complyport Consultants will discuss the relevant changes with clients in due course.

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