Friday March 16 2018

News Source: Fund Regulation

Focus: Other

Type: General

Country: European Union




On 12th March 2018, the Commission adopted a proposal for a regulation on facilitating cross-border distribution of collective investment funds, amending the EuVECA and EuSEF regulations, and a proposal for a directive amending the UCITS and the AIFM directives. The proposals aim to improve the transparency of national requirements, remove burdensome requirements and harmonise diverging national rules.

It is anticipated that these measures will result in the cross-border distribution of investment funds becoming simpler, quicker and cheaper. These proposals form part of the Commission’s action plan on the Capital Markets Union.

Summary of Key Proposals:

  • Clarification that host member states can apply fees and charges in connection with marketing;
  • New provisions regarding the cessation of marketing;
  • New requirements for marketing communications;
  • Permissible “pre-marketing” by an AIFM is defined;
  • New provisions relating to marketing by an AIFM to retail investors; and
  • Amendment of provisions affecting the cross-border activities of UCITS managers.

The Amending Regulation clarifies that national competent authorities can levy fees or charges on AIFMs or UCITS managers to authorise, register or exercise supervisory powers under AIFMD or the UCITS Directive, so long as there is proportionality to the regulator’s costs.

An AIFM or UCITS manager must only discontinue marketing units of an EU AIF or UCITS in a jurisdiction in which it has exercised a marketing passport if the following conditions are met:

  • there is a maximum of 10 investors in the relevant Member State, holding up to 1% of the AUM of the AIF or UCITS;
  • the AIFM or UCITS manager has made a blanket offer to redeem, free of any charges or deductions, all units in the AIF or UCITS held by investors in the relevant Member State; and
  • the AIFM or UCITS manager has published its intention to cease its marketing activities in that jurisdiction.

The Amending Directive introduces a new definition of “pre-marketing” which means it is a direct or indirect provision of information on investment strategies or investment ideas by an AIFM or on its behalf to professional investors domiciled or registered in the Union in order to test their interest in an AIF that is not yet established.

Accordingly, if an activity does not fall within this narrow definition of “pre-marketing” the implication is that it should be treated by Member States as “marketing”.

Marketing Communications made to investors by the AIFM or UCITS manager must now:

  • be identifiable as marketing communications;
  • be fair, clear and not misleading; and
  • present risks and rewards of purchasing units or shares of a fund in an equally prominent manner.

Moreover, national regulators will require notification of marketing communications which UCITS managers intend to use in their dealing with investors and which AIFMs intend to use directly or indirectly in their dealings with retail investors.

Under the proposed legislation, national regulators will not be permitted to make any such notification a pre-condition of marketing.  However, national regulators will have up to 10 working days following receipt of a notification to inform the relevant manager of any request to amend a marketing communication.

The Directive will also introduce requirements into AIFMD that will apply where any AIFM is marketing units in an AIF to retail investors.  In this case, an AIFM is required to put facilities in place in the relevant Member State to perform the following tasks:

  • processing investors’ subscription, payment, repurchase and redemption orders in connection with units in the relevant AIF;
  • providing investors with information on how subscriptions can be made and how redemption proceeds will be paid;
  • handling information relating to the exercise of investors’ rights arising from their investment in the AIF in that jurisdiction;
  • making available to investors copies of the AIF’s rules or instruments of incorporation and its latest annual report; and
  • providing investors with information, in a durable medium, relevant to the above tasks being performed by the facilities put in place.

Moreover, the UCITS Directive provides that a UCITS manager is required to maintain facilities in any Member State in which a UCITS is marketed for making payments to unitholders, redeeming units and making available any required investor information.  UCITS managers will now maintain facilities in the same way as AIFMs that are marketing to retail investors.

A UCITS manager is required to give prior notice when it is making changes to its marketing arrangements as set out in a marketing passport notification.  This written notification must be given at least one month prior to implementing the proposed change or immediately after implementing an unplanned change.

The consultation period runs to 10 May 2018.

Please click on the above link for more information.