Ireland: Cross-Border Distribution Of Collective Investment Schemes

INTRODUCTION

On 12 March, 2018 the European Commission presented its original proposals for a Directive and accompanying Regulation on the crossborder distribution of collective investment schemes with the objective of addressing regulatory barriers which it had identified as a significant disincentive to EU cross-border distribution.

Following a period of negotiation and technical finalisation between the European Commission, the European Parliament and the Council of the EU, the Council on 22 February, 2019 published an "I" item note setting out the final compromise texts of the:

  • Proposed Directive amending the UCITS Directive and AIFMD with regard to the cross-border distribution of collective investment funds (the "Directive"); and
  • Proposed Regulation on facilitating cross-border distribution of collective investment funds (the "Regulation").

The Directive and Regulation aim to 'coordinate the conditions for fund managers operating in the internal market and facilitate cross-border distribution of the funds they manage' by filling in the regulatory gaps, aligning the notification procedure to the competent authorities, authorising ESMA to develop new technical standards, improving the transparency of national requirements and ensuring national authorities can control AIFM's pre-marketing arrangements, while all the while safeguarding investor protection.

TIMEFRAME

The European Commission's intention is that these texts will be adopted before the European Parliament elections in May 2019. As such the Parliament plans to consider the proposals before the end of the current legislative term on 18 April, 2019. Each legislative act will enter into force on the twentieth day following its publication in the official Journal of the European Union. Member states will have twenty-four months from the date of entry into force of the Directive to transpose the provisions thereof into national law. Progress on drafting of Irish implementing measures are understood to be at an advanced stage. The Regulation will apply from the date of entry into force except for certain provisions which will apply twenty-four months after the date of entry into force, i.e.

  • paragraph 1 and 4 of Article 2 relating to marketing communications;
  • paragraph 1 and 2 of Article 3 relating to the publication of national provisions concerning marketing requirements;
  • Article 12 relating to amendments to Regulation (EU) No 345/2013 on European venture capital funds; and
  • Article 13 relating to amendments to Regulation (EU) No 346/2013 on European social entrepreneurial funds.

THE DIRECTIVE – KEY CHANGES

The proposed Directive contains amendments to the UCITS Directive and the AIFMD relating to, inter alia, creating a more harmonised approach marketing facilities, notification of information to member states, the discontinuation of marketing and pre-marketing of AIFs.

Harmonised rules relating to marketing content, facilities and notification of updated information

  • UCITS provisions on content requirements for UCITS marketing communications (Article 77) and the publication of national rules on marketing (Article 91(3)) are replaced with provisions in the proposed Regulation (which will allow less scope for differences in implementation).
  • The provisions of the UCITS Directive which require UCITS to provide facilities as implemented by certain national member states have proven to be burdensome. Consequently, Article 92 regarding the provision of local facilities will be replaced so that the facilities requirements are harmonised and that they may be provided electronically or by means of other distance communications with investors. Accordingly, Member States may no longer require the UCITS Management Company ("ManCo") to provide the facilities by means of a physical presence or requiring the appointment of a third party to process dealing orders and payments. Similar provisions are introduced for AIFMs marketing AIFs to retail investors.
  • In the event of a change to information notified to a member state or a change regarding share classes to be marketed, the proposed Directive provides that written notice must be given to the national competent authority of the home member state of the UCITS and the competent authority of the host member state at least one month before implementing that change. If it is of the view that as a result of the change the UCITS would no longer comply with the UCITS Directive the home state competent authority must then notify the UCITS within 15 working days that it is not to implement the change. Otherwise the national competent authority of the home member state must inform the host regulator without delay. Importantly where a change is implemented subsequent to a notification by the competent authority of the home member state that the UCITS is not to implement that change and pursuant to that change the UCITS no longer complies with the UCITS Directive, the competent authorities of the home Member State of the UCITS are required to take all due measures including, where necessary, the express prohibition of marketing of the UCITS and shall notify accordingly the competent authorities of the host Member State without undue delay. Similar changes are made to the AIFMD in respect of the approval or rejection of planned changes.

Discontinuation of Marketing

The proposed Directive provides for a more harmonised approach to the discontinuation of marketing in order to create more economic and legal certainty for managers in a host member state, in particular requiring that the UCITS fulfil all of the following conditions:

  1. make a blanket public offer to repurchase, free of charges and deductions, all shares or units held by investors in that Member State, which offer must remain open for at least 30 working days and
  2. publicise its intention to stop marketing in that Member State, by a medium customary for marketing a UCITS (which may include electronic means); and
  3. modify or terminate any contractual arrangements with financial intermediaries or delegates to prevent any further marketing.

The information referred to in points (b) and (c) must make clear the consequences for investors if they do not accept the offer to redeem or repurchase their units.

  • The ManCo will notify its home competent authority who, no later than 15 days, from the date of receipt will transmit the request to the host competent authority and to ESMA and inform the ManCo. The UCITS may not be marketed thereafter although the obligations to provide information to investors who remain will continue.
  • Similar provisions are introduced for AIFMs discontinuing marketing of AIFs, other than closed-ended AIFs and European long-term investment funds.

Pre-Marketing (AIFs)

  • A new harmonised regime for pre-marketing of AIFs in the EU will be introduced. While currently some member states permit pre-marketing by an AIFM the conditions attaching to such pre-marketing vary considerably in those member states. The proposed Directive will provide for an authorised EU AIFM to engage in pre-marketing in the EU.

"Pre-marketing' is defined as the " provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or registered in the Union in order to test their interest in an AIF which is not yet established, or in an AIF which is established, but not yet notified for marketing in accordance with Article 31 or 32, or in compartments of such AIFs, in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the investor to invest in the units or shares of that AIF or compartment."

An authorised EU AIFM engaging in pre-marketing may not present information to investors relating to or containing reference to an established AIF, enabling investors to commit to acquiring units or shares of a particular AIF; or amounting to a constitutional document, a prospectus, a subscription forms or similar document whether in a draft or a final form allowing investors to take an investment decision. Any pre-marketing document shall clearly state that the document does not constitute an offer or an invitation to subscribe to units or shares of an AIF; and the information presented in those documents should not be relied upon because it is incomplete and may be subject to change. AIFMs which engage in pre-marketing must notify their home competent authority.

THE REGULATION – KEY CHANGES

The proposed Regulation will also amend the EuVECA Regulation (Regulation 345/2013) and the EuSEF Regulation (Regulation 346/2013) to provide for a pre-marketing regime similar to that set out for AIFMs in the draft Directive amending the UCITS Directive and AIFMD with regard to cross-border distribution of funds.

The proposed Regulation sets out harmonised requirements for a transparent marketing framework and provides for administrative matters, including a greater role in centralised information gathering and decision-making by ESMA:

  • National regulators will be permitted to charge fees which must be proportionate to the regulatory tasks carried out and subject to a transparent process.
  • Where national law requires that marketing materials be submitted to the national regulator for review, the national regulator must itself comply with provisions which aim to improve transparency and promote non-discriminatory treatment, regardless of the member state in which the fund is authorised.
  • UCITS and AIFs will be required to comply with harmonised requirements for their marketing materials with ESMA required to issue implementing technical standards to the Commission within eighteen months of the entry into force of the Regulation. ESMA is also tasked with drafting a range of standard templates, forms and procedures governing the transmission of the required information. National regulators will be required to transmit notifications, notification letters, written notices and information relating to notifications to ESMA.
  • The proposed Regulation obliges ESMA to publish and maintain on its website a central database, publicly accessible in at least a language customary in the sphere of international finance, listing all AIFMs, ManCos, AIFs and UCITS which those AIFMs and ManCos are managing and marketing as well as the member states in which those funds are marketed.

COMMENT

It is expected that the changes contained in the proposed Directive and Regulation will bring welcome clarity to the AIF pre-marketing concept, where conditions currently vary significantly between member states where pre-marketing is permitted. Certain of the other harmonising proposals have been met with mixed reviews from market participants given the disparities between the fund products involved (some of these concerns were echoed by the European Parliament) and it remains to be seen the extent to which the proposals will contribute to the stated objective of increasing the cross-border distribution of funds while improving ease and transparency, particularly against the backdrop of considerable developments, chief amongst them the impact of Brexit, in the regulatory regimes governing EU cross-border distribution channels.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions