Pre-Marketing Regulation under AIFMD: The 18-Month Timeframe
In a significant move, the European Parliament's Economic and Monetary Affairs Committee (ECON) has proposed changes to the regulations governing premarketing activities for Alternative Investment Funds (AIFs) within the EU. These changes aim to harmonize and regulate activities that occur prior to the actual marketing of AIFs, providing a formal definition and regulatory framework for "pre-marketing."
The proposed changes include the implementation of standardized rules by August 2, 2021, obliging Member States to adopt consistent regulations on what constitutes pre-marketing activity. The scope of pre-marketing is also set to be broadened, requiring fund managers to notify the relevant regulator, such as BaFin for Germany, within two weeks of starting pre-marketing activities.
The proposed changes aim to ensure transparency and investor protection by defining the boundaries and regulatory obligations around pre-marketing activities for alternative funds. They complement the existing EU-wide marketing passport systems under AIFMD and other related directives, which focus on cross-border fund marketing and distribution.
According to the draft report, AIFMs will be required to provide information about their premarketing activities upon request to their competent authorities after the initial approach. It is also rumored that the material and information used for premarketing activities will have to be notified in advance to both the home state authority of the AIFM and the host state authorities of the domiciles where any such AIFMD premarketing activities are carried out.
The draft report also proposes a process similar to a notification process for premarketing activities, involving both the home state authority of the AIFM and the host state authorities where premarketing will take place. This process is intended to prevent AIFMD premarketing from being used for reverse solicitation and to circumvent AIFMD provisions.
The proposed directive includes a new '18-month rule' for investors approached by AIFMs during premarketing activities. This rule allows investors to acquire units or shares in such AIFs within 18 months from the initial approach. However, the exact implementation of the '18-month rule' and its effectiveness in addressing the issue of reverse solicitation and circumvention of AIFMD provisions remains uncertain.
The AIFMD, implemented in 2011, has led to a decrease in the casual marketing of AIFs, with the AIFM directive and the passport for marketing being initial regulatory steps. Attilio Veneziano, the Managing Partner at Veneziano & Partners, has been a vocal advocate for these changes, emphasizing the need for clarity and oversight in early-stage AIF investor communications before formal marketing begins.
It is yet to be seen how these changes will be implemented and what impact they will have on the AIF industry. As the regulatory landscape continues to evolve, it is crucial for fund managers to stay informed and adapt to these changes to ensure compliance and maintain a competitive edge.
[1] ECON Draft Report on the cross-border distribution of collective investment schemes (2018/2076(INI)) [3] European Parliament's Economic and Monetary Affairs Committee [4] Alternative Investment Fund Managers Directive (AIFMD)
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This article was originally published on December 4th, 2018.
The proposed changes to pre-marketing activities for Alternative Investment Funds (AIFs) within the EU, as outlined in the ECON Draft Report on the cross-border distribution of collective investment schemes, aim to enhance transparency and investor protection by providing a formal definition and regulatory framework for pre-marketing. These changes are expected to affect the business operations of fund managers, as they will be required to follow standardized rules and notify the relevant authorities within two weeks of starting pre-marketing activities. The changes also have implications for politics and policy-and-legislation, as they are part of a broader trend towards increased regulation of the finance industry, and may impact general-news coverage of business and finance.
