In April 2019, the European Parliament approved changes to the Alternative Investment Fund Managers Directive (“AIFMD”) and the UCITS directive to facilitate cross-border marketing of funds. The changes, which take the form of a directive and a regulation, seek to improve the efficiency of cross-border marketing of funds across the EU.

Some key aspects of the changes

• Creation of a definition of ‘pre-marketing’ as applicable to authorised EU AIFMs and EU AIFs (this is explored in greater detail below)
• All UCITS and AIFMs (based in EU or outside of the EU), that are marketing to retail investors in the EU, must establish ‘local facilities’ in the Member States where marketing is taking place, to perform certain tasks. These include processing of subscriptions and redemptions and certain transparency requirements. Note however that this does not mean that the UCITS/AIFM must have a physical presence in the relevant Member States
• Clarifying the process of ceasing to market a UCITS or an AIF (using a passport) in an EU Member State
• Clarifying the process for UCITS or EU AIFMs that manage or market EU AIFs reporting ‘material changes’ to the Home State regulator
• Requirements regarding marketing communications for UCITS and authorised EU AIFMs
• Creation of a central database – maintained by ESMA – covering marketing requirements for UCITS and AIFs in each Member State, fees and charges levied by National Regulators regarding cross-border activity and a list of AIFMs, AIFs and UCITS

Pre-marketing

It is intended that the introduction of a ‘pre-marketing’ definition will clarify the parameters of ‘marketing’, the parameters of which have been interpreted in a number of ways by Member States. ‘Pre-marketing’ applies with specific reference to potential professional investors in Member States, and applies in order to test a potential investor’s interest in an AIF, which is not yet established or which has not yet submitted a marketing passport notification or a notification to market in the host state of the AIFM. This activity cannot include the offering or placement of shares or units in the AIF. Hence, inter alia, subscription forms and final versions of offering documents cannot be provided to potential investors during the ‘pre-marketing’ phase, and any draft offering document must state that it does not constitute an offer or invitation, and that the information in the document may be subject to change.

If a professional investor in a Member State subscribes for units or shares within 18 months of the start of the pre-marketing phase in that Member State, this is considered to be as the result of ‘marketing’ pursuant to the marketing notifications made to that EU Member State. In other words, such a subscription cannot be as the result of a ‘reverse enquiry’.

It is anticipated that the legislation will apply from Q3, 2021.