Reminder to Managers of New Fund Marketing Rules in the EU:
The new rules for the promotion of funds introduced by the new directive on the cross-border division of undertakings for collective investment (CBDF) apply to the EU from 2 August 2021. It is currently not available in the UK.
CBDF rules apply to investment managers and agents selling funds in the EU. This note discusses the provisions of the CBDF rules on pre-marketing activities by alternative investment fund managers (AIFMs), reverse orders, marketing communications, a new marketing design process, and marketing for investors.
2. When will the new rules come into effect?
These rules entered into force on 1 August 2019 and are applicable until 2 August 2021 in EU countries that have transposed the CBDF directive. The CBDF regulation is directly applicable in the EU and is in effect until 2 August 2021, with no further implementation.
3. Will these affect drivers in the US, UK, and other countries outside the EU?
The CBDF rules apply to EU AIFMs authorized under the Alternative Investment Fund Managers Directive (AIFMD). However, EU countries cannot impose equivalent requirements on third-country AIFMs. The application of the CBDF rules to non-EU AIFMs may vary depending on the EU Member State.
The application of the new pre-marketing regime to non-EU AIFMs is expected, but not confirmed, in several major EU jurisdictions that may register non-EU AIFMs for trading under the National Private Placement Scheme (NPPR).
The new marketing communications requirements also apply to all funds traded in the EU (including those managed by non-EU AIFMs).
4. New pre-marketing regime
Pre-marketing was not a formal legal concept. The CBDF rules provide explicit pre-marketing, which is defined as:
“information or communications, directly or indirectly, about investment strategies or investment ideas provided by or on behalf of [a manager] to prospective professional investors incorporated or registered with the federal government, in order to establish their participation in an AIF or – a fund to be increased, not yet established, tested or approved, but not yet registered for trading in the [AIFMD] in the Member State in which the potential investors are established or have their registered office and, in any case, no offer to sell to potential investors who do not invest in shares or units of that AIF ‘or sub-fund’s “.
To enable pre-marketing, some requirements must be met:
1. Pre-marketing materials provided to prospective investors may not contain the following:
one. any material (including draft) that contains sufficient information to enable an investor to make an investment decision regarding investment in an AIF
2. registration forms (or comparable) (draft or final form)
3. FIA final entry or offer not yet accepted.
The draft documents must contain an indemnity stating that “this is not an offer or request for a listing of units or shares of an AIF and that the information presented here is not considered incomplete and is subject to change.
ii. The AIFM must ensure that investors do not invest in an AIF during the premarketing phase and that investors contacted during the premarketing phase-only invest after the marketing message has been published.
ii. A third party may pre-market the AIF only if (a) it meets the pre-marketing conditions; and (b) is one of the following: an investment firm or a subsidiary of MiFID, an EU credit institution, a UCITS management company, or an EU AIFM.