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Amending the Alternative Investment Fund Managers Directive (AIFMD) and the UCITS Directive, the EU Cross-border Distribution of Collective Investment Undertakings Directive and Regulation (the CBDF), which was published in the official journal on 12 July 2019, aims to reduce barriers to the marketing and sales of certain funds and will take effect from 2 August 2021.

Authors: Karen Butler Shervin Shameli Tim Dolan Panos Katsambas Matthew Evans Emily E. Cartwright

Harmonisation of the ‘pre-marketing’ regime

The CBDF introduces a new harmonised ‘pre-marketing’ regime under the AIFMD for EU-authorised AIFMs (EU AIFMs) marketing units or shares in EU AIFs that are either not yet established or are established but not yet notified for marketing in the EU. This means that registered AIFMs will not be able to benefit from the pre-marketing regime, and the impact this new regime will have on non-EU AIFMs is currently unclear.

The new regime only permits pre-marketing activities that are addressed to professional investors (as defined in the AIFMD) in the EU and provided that there is no ‘offer or placement’ (as defined in the AIFMD) of the relevant units in the AIF to such investors.

Procedure

 In order to benefit from the new pre-marketing regime, the following procedure must be followed:

  • Any pre-marketing information presented to professional investors by an EU AIFM must not (i) be sufficient to allow investors to commit to investing in the units of a particular AIF; (ii) include subscription forms or similar documents, whether in draft or final form; and (iii) include the final form constitutional documents, prospectus or offering documents of a not-yet-established AIF. Drafts of the constitutional documents and/or offering material can be circulated to professional investors provided that the documents (i) do not contain sufficient information to allow the investors to ‘take an investment decision’, (ii) clearly state that they do not constitute an offer or an invitation to subscribe for units in the AIF, and (iii) confirm that the information should not be relied upon as it is incomplete and subject to change. Given the vagueness of the test and definition of ‘pre-marketing’, there is a risk that member states’ regulators may interpret the scope of the pre-marketing regime differently. Although, it is hoped that clarity and guidance at the EU level will minimise this risk.
  • Within two weeks of commencing the pre-marketing activities, the EU AIFM seeking to benefit from this regime must notify its home member state regulator. The CBDF does not dictate the form of the notification. However, it must include (i) details of the AIF subject to the pre-marketing activities, (ii) an outline of the pre-marketing materials used, and (iii) details of the member states in which the pre-marketing is being conducted. The home member state regulator will in turn notify those member states of the pre-marketing activities in that jurisdiction. It is important to note that this pre-marketing notification is distinct from and separate to the formal marketing notification process required under the AIFMD. In this regard, EU AIFMs must ensure that professional investors (i) do not invest in an AIF through their pre-marketing activities, and (ii) only invest in the pre-marketed AIF through the formal marketing notification process mandated under the AIFMD, if the professional investors are contacted as part of the EU AIFM’s pre-marketing activities.