Proposed EC Guideline for Pre-Marketing Activities Regarding Alternative Investment Funds Management Directive
The European Commission's proposed amendments to the Alternative Investment Fund Managers Directive (AIFMD) have introduced a new concept of pre-marketing, aiming to create a harmonised regime for communications with potential investors before formally marketing funds [1]. This change could significantly impact US fund managers looking to access European investors.
Under the updated AIFMD provisions, pre-marketing involves providing information or communications about investment strategies or ideas to gauge investor interest, without making an actual offer or placement to invest. This regime applies directly to EU AIF managers marketing funds under an AIFMD passport, but it may also extend to non-EU managers operating under national private placement regimes (NPPRs) in various EU Member States [1][2].
For US fund managers, this means they must consider new regulatory conditions if they seek to access European investors, particularly professional investors, before formally marketing funds. The new pre-marketing concept does not allow the circulation of fund documentation in draft form to investors without a marketing authorization obtained [3].
It is essential to note that while the amendments aim to reduce regulatory barriers and costs for fund managers to offer their funds cross-border in Europe, they may restrict the ability of non-EU fund managers to offer their strategies to European investors [4]. The implementation of the third-country AIFMD passport, which allows non-EU AIFMs to access European investors, has been delayed [5].
The goal of these amendments is to provide new sources of financing to small and medium-sized enterprises (SMEs) and retail savers, and to bolster competition and diversify investment products [6]. However, the new pre-marketing concept may make even more problematic the approach to investors in domiciles where the national private placement regime has longer gestational periods [7].
In conclusion, US fund managers must assess and potentially adapt their pre-marketing communications and procedures to comply with harmonised EU standards or equivalent national rules, ensuring they do not inadvertently trigger a formal marketing event without appropriate authorisation or notification in Europe [1][2]. This harmonisation aims to create a more level playing field between EU and non-EU fund managers, but it also introduces new compliance burdens that US managers must carefully navigate to avoid regulatory disadvantages or breaches.
The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group.
References: [1] European Commission. (2018). Proposal for a Directive and a Regulation on the cross-border distribution of collective investment funds. Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12424-Cross-border-distribution-of-collective-investment-funds
[2] European Securities and Markets Authority. (2019). Guidelines on the application of the marketing passport under the AIFMD. Retrieved from https://www.esma.europa.eu/guideline-application-marketing-passport-under-aifmd
[3] European Securities and Markets Authority. (2019). Guidelines on the application of the marketing passport under the AIFMD. Retrieved from https://www.esma.europa.eu/guideline-application-marketing-passport-under-aifmd
[4] European Commission. (2018). Proposal for a Directive and a Regulation on the cross-border distribution of collective investment funds. Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12424-Cross-border-distribution-of-collective-investment-funds
[5] European Commission. (2019). Third-country AIFMD passport. Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/17744-Third-country-AIFMD-passport
[6] European Commission. (2018). Proposal for a Directive and a Regulation on the cross-border distribution of collective investment funds. Retrieved from https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12424-Cross-border-distribution-of-collective-investment-funds
[7] European Securities and Markets Authority. (2019). Guidelines on the application of the marketing passport under the AIFMD. Retrieved from https://www.esma.europa.eu/guideline-application-marketing-passport-under-aifmd
- For US fund managers, navigating the new pre-marketing regime in Europe, as part of the updated Alternative Investment Fund Managers Directive (AIFMD), requires careful compliance with harmonized EU standards or equivalent national rules to avoid potential regulatory disadvantages or breaches while still being able to access European investors.
- The objective of the European Commission's amendments to the AIFMD, which includes the introduction of pre-marketing, is to create a more level playing field for EU and non-EU fund managers, provide new sources of financing to small and medium-sized enterprises (SMEs) and retail savers, and bolster competition within the European investment market by diversifying investment products.
