European Union: Revised Proposals For New AIFMD Marketing Rules: How Might They Impact Non-EU Funds And Their Managers?

Last Updated: 26 April 2019
Article by Nicholas Holman and Jonathan Baird

Back in March 2018 the European Commission announced a proposal for a supplementary Alternative Investment Fund Managers Directive (AIFMD) focussed on the subject of so-called "pre-marketing" of private equity and other alternative investment funds to European professional investors. ( See our previous newsflash here.)

By way of reminder:

  • Currently, AIFMD only regulates "marketing" to such investors, and not "pre-marketing".
  • The boundary between the two concepts is extremely important, because many EU countries have imposed additional barriers in relation to "marketing" and managers don't want to have to comply with the relevant requirements unless they have a reasonably good prospect of securing a commitment from an investor located in the relevant country.
  • The 'catch', of course, is that the only way a manager can assess how good its chances are is by testing the market beforehand - so the ability to "pre-market" is essential to avoid significant wasted time and expense.
  • The boundaries in relation to pre-marketing are set unilaterally by each country in relation to its own territory. However, in many cases there is very little guidance and so the position is uncertain (and how far to push things becomes a risk-based judgment for each manager).
  • In other cases there is some formal guidance on pre-marketing but it is so restrictive that managers have tended simply to cut the relevant jurisdiction out of their marketing plans. This is bad for investors in the more conservative jurisdictions as they are currently being denied access to many high-performing funds.

The Commission's proposal introduces a uniform definition of pre-marketing across the whole of the EU. However, in its original version it was based on the approach that has evolved in member states such as Germany, which is more restrictive and less pragmatic than what is currently permitted in countries such as the UK. However, the proposal has now been revised, and is now much closer to the current UK position such that, for example, draft documents could be provided and detailed fund terms discussed.

On the face of it, this is excellent news. However, a closer read reveals several potential bumps in the road that managers need to be very alive to when planning their next fundraise:

  • Under the proposal, any "communication...on investment strategies or investment order to test [the investors'] interest in a [fund] which is not yet established"1  would be expressly caught within the scope of pre-marketing. In view of the new requirements that will apply to pre-marketing in future (see below), it will be essential to adopt a pragmatic and common sense approach here, so that this only captures overtly promotional activity, that is specifically in relation to a particular proposed fund (and not, for example, more general discussions about markets and possible fund strategies that managers would typically have with their clients as part of any normal relationship meeting).
  • Strictly speaking, the proposed new rules only apply to EU managers promoting EU funds. Ever since AIFMD first went live, there has been only modest harmonisation of the rules in relation to non-EU managers. EU member states have always had (and many have utilised) the ability to impose additional requirements of their own on top of the baseline requirements set out in Article 42 of AIFMD. Unsurprisingly, there is no overt change to this position in the Commission's latest proposals. What this means is that it is open to any EU member state to apply a more restrictive definition of pre-marketing to a non-EU manager than to an EU manager. We don't think this will happen in practice, but it is nevertheless important for non-EU managers to remember that the good aspects of the proposed definition of pre-marketing would not automatically benefit them.
  • However, that is not the real sting in the tail. Of much greater concern to non-EU managers are the requirements in the Commission's proposal in relation to:

    • Notification of pre-marketing activity, and
    • Reverse solicitation.

The proposal expressly bars EU member states from adopting a regime that is more advantageous for non-EU managers than for EU managers. So, when the domestic legislation is implemented in each country, we can expect that the position for non-EU managers will be the same as (or potentially worse than) the new rules for EU managers. As a result, the issues we explain below in relation to notification of pre-marketing activity and restricting use of reverse solicitation should be looked at very carefully by all non-EU managers.

Notification of pre-marketing activity

Paradoxically, but very cleverly, the EU authorities are actually using the liberalisation of pre-marketing to exert much greater control over pre-marketing. The way they propose to achieve this is by requiring the manager to notify its home regulator whenever it starts pre-marketing in another EU country. It's not clear in the proposal how this mechanism would be applied to a manager whose home regulator is outside the EU, but on paper this would represent a sea-change for non-EU managers as they can currently pre-market without any EU regulatory monitoring at all. Crucially, it provides a means for the local regulator to obtain a lot more information regarding which managers are promoting fund products in their territory, and it also will help them to police the more restrictive new rules on reverse solicitation (see below).

Reverse solicitation

Under the proposed new rules, a subscription made within an 18 month period of pre-marketing activity will be deemed to have resulted from marketing (i.e. rendering reliance on reverse solicitation impermissible). It has always been the case that a manager cannot (lawfully) use preliminary marketing activities in relation to a fund in order to, in effect, solicit a reverse enquiry from an investor. However, an 18 month moratorium is a very long period indeed.

The other key issue with the moratorium is that it is unclear whether it applies to each investor or to each country. The drafting is very loose, and one reading of it (which we have seen several market commentators adopting) would imply that any pre-marketing in one country would put all investors in that country offside for 18 months as regards the possibility of reverse solicitation. Such an outcome would seem perverse, since in the world of private funds it is perfectly possible for one investor in Munich genuinely to reach out to a manager on its own initiative without having any prior knowledge of very discreet, one-to-one promotional activity that the same manager may coincidentally have engaged in with an investor 800km away in Hamburg (and even more so where the discussion in Hamburg took place 17 months before the discussion in Munich).


Although the current patchwork of pre-marketing rules presents some major challenges for fund managers and their placement agents, currently they are at least able to take a business decision based on facts and circumstances (overlaid with some legal advice). However, if/once the proposed definition of pre-marketing becomes written in law it will be much harder to take a pragmatic view.

Moreover, the "carrot" of a permissive UK-style approach to defining the boundary between pre-marketing and marketing has unfortunately been tied to three "sticks", namely (i) an extremely broad definition of what could amount to pre-marketing, (ii) a requirement to notify the regulator as soon as any pre-marketing commences, and (iii) what amounts, in effect, to a clampdown on the use of reverse solicitation.

The EU legislative process in relation to the proposal is not yet complete (e.g. it still has to be signed off by the European Parliament), however the current expectation is that it will be approved and that the new regime will go live around the summer of 2021. Thankfully this means that managers currently on the fundraising trail should not be affected, but funds setting out to raise money from 2020 onwards will need to factor this into their planning.

Impact of Brexit

As always, we also need to consider whether Brexit would change the position for (pre)marketing by UK managers or to UK investors, assuming that post-Brexit the UK would not be part of the single market.

As regards UK-headquartered managers seeking to market their funds in continental Europe, of course many larger managers will probably be doing so through their fund platforms and affiliated businesses in Ireland and/or Luxembourg, in which case the new EU rules would apply anyway. For UK domiciled funds sold into continental Europe that are managed by a UK manager, the manager would need to comply with the proposed new EU rules in just the same way as a U.S. manager would.

As regards promotional activity directed at UK investors, it is extremely unlikely that a more restrictive regime would be adopted than the one set out in the EU's proposal. It is more likely that the UK would either adopt a similar approach, or alternatively decide to operate a more permissive regime (e.g. as currently, not requiring any notification of pre-marketing) and thereby make it easier for US and Asia based managers to market their funds to UK investors than to EU investors. The actual approach will in practice be determined at a political level, depending on whether the UK government decides to seek a long-term, reciprocal access deal for financial services with the EU based on equivalence (i.e. very close alignment to the EU single market) or a clean-break from the single market. Watch this space – but don't hold your breath!

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

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

Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
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 (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

To Use 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.


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.


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