EUROPEAN UNION: EFAMA Publish Position Paper on EC Proposal on Facilitating Cross-Border Distribution of Collective Investment Funds

Friday June 1 2018

EFAMA highlight two key aspects of the proposal serving to make the fruition of the UCITS/AIFMD passport regime more difficult:

• The narrow definition of pre-marketing for AIFs, along with its related conditions, as one likely to curb the existing flexibility for management companies when sounding the interest of prospective investors for both existing AIFs and potential investment ideas on a domestic and cross-border basis; and
• The restrictive conditions governing the de-notification of UCITS/AIFs for the consequent cessation of marketing their units/shares in EU host jurisdictions, likely to hinder management companies to enter a host jurisdiction from the beginning.

Consequently, regarding the first point, EFAMA call for an expansion of the pre-marketing conditions for AIFs to also include existing AIFs, as well as references thereto and seeding capital commitments in an AIF’s pre-launch phase. Moreover, the pre-marketing regime should necessarily allow for the preliminary exchange of non-final documents between an AIFM and one or more prospective investors, while also barring the opportunity to circumvent notification requirements where the pre-marketing proves to be successful. EFAMA would, moreover, invite ESMA to consider practical steps in view of harmonising pre-marketing practices for UCITS funds by means of “Level 3” guidance with a view to fostering greater regulatory convergence amongst Member States.

With regard to the de-notification conditions, EFAMA call for the elimination of the numerical thresholds prescribing conditions for the de-notification of funds from a given host jurisdiction, as their logic challenges management companies’ business decisions and risks obtaining the opposite of the intended effect, i.e. discourage cross-border distribution in the first place.

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