On 16 April 2019, the European Parliament adopted legislative resolutions on a proposal for a Regulation of the European Parliament and of the Council on facilitating cross-border distribution of collective investment undertakings and amending regulations (EU) n° 345/2013, (EU) n° 346/2013 and (EU) n° 1286/2014 (the “Regulation”). The proposal was signed on 20 June 2019 and should be published soon.
The Regulation aims to remove the current regulatory barriers to the cross-border distribution of investment funds in order to make their cross-border distribution simpler, faster and cheaper. It establishes uniform rules on the publication of national provisions concerning marketing requirements for collective investment undertakings and on marketing communications addressed to investors, as well as common principles concerning fees and charges levied on fund managers in relation to their cross-border activities. It also provides for the establishment of a central database on the cross-border marketing of collective investment undertakings.
The Regulation applies to AIFMs, UCITS management companies and self-managed UCITS, EuVECA managers and EuSEF managers (collectively the “Managers”).
Requirements for marketing communications:
- All marketing communications addressed to investors must be identifiable as such and describe the risks and rewards of purchasing units or shares of an alternative investment fund (“AIF”) or undertaking for collective investment in transferable securities (“UCITS”) in an equally prominent manner
- All information must be fair clear and not misleading.
- It must be ensured that marketing communications that contain specific information about a UCITS do not contradict or diminish the significance of the information contained in the prospectus or the key investor information
- marketing communications must contain clear information that the Manager may decide to terminate the arrangements made for the marketing of its collective investment undertakings
- AIFMs, EuVECA and EuSEF managers shall ensue that marketing communications do not contradict the information which is to be disclosed to investors in accordance with Directive 2011/61/EU (“AIFMD”), Regulation (EU) No 345/2013 (the “EuVECA Regulation”) or Regulation (EU) No. 346/2013 (the “EuSEF Regulation”) or diminish its significance.
ESMA should issue guidance within 24 months of the date of entry into force of the Regulation on the application of the requirements for marketing communications.
Publication of national provisions concerning marketing requirements
National competent authorities (“NCAs”) shall publish and maintain on their websites up-to-date and complete information on the applicable laws and regulations governing marketing requirements for AIFs and UCITS and shall notify same to ESMA as well as any changes thereto. ESMA shall publish and maintain a central database containing summaries of such laws and regulations.
Ex-ante verification of marketing communications
NCAs may require prior notification of marketing communications which UCITS management companies, and, in respect to marketing to retail investors only, AIFMs, EuVECA or EuSEF managers, intend to use for purposes of verifying compliance with the Regulation.
ESMA will have to report on such ex-ante verifications by March 2021 and every two years thereafter.
Common principles concerning fees or charges
Where fees or charges are levied by NCAs for carrying out their duties in relation to the cross border activities of the Managers such fees or charges shall be consistent with the overall cost relating to the performance of the functions of the NCA. The NCAs and ESMA shall also publish and maintain up-to-date information on their websites listing such fees or charges.
ESMA Central Data Base
ESMA shall publish within 30 months after the date of entry into force of the Regulation a central database on cross-border marketing of AIFs and UCITS listing all AIFs and UCITS that are marketed in a Member State other than their home Member State, the Member States in which they are marketing and their Manager.
Amendments to the EuVECA Regulation and the EuSEF Regulation
The Regulation amends the EuVECA and EuSEF Regulations in order to define “pre-marketing” and to set out the rules governing pre-marketing which are similar to the rules applicable to AIFs (see article in this newsletter on the Directive to Facilitate Cross Border Distribution of Investment Funds.