Australia
Answer ... The marketing of AIFs is regulated by the Corporations Act 2001. The regulatory requirements apply regardless of whether the fund is marketed to wholesale clients or retail clients. The entity marketing a fund must be licensed (ie, hold an Australian financial services licence (AFSL) or have the benefit of a particular exemption.
Australia
Answer ... In order to engage in marketing activities in Australia, the promoter must hold an AFSL (or a ‘foreign AFSL’). A licence can be limited – for example, by allowing the entity to engage in dealing and advice activities (typically, marketing would cover either or both of these) to wholesale investors only. Although an AFSL may include authorisations that allow the holder to market funds to retail clients, the particular funds must first be registered in order to be offered to retail clients.
Australia
Answer ... The procedures for obtaining an AFSL differ according to whether the entity is an Australian incorporated and domiciled entity or whether it is a foreign investment adviser regulated by an approved foreign jurisdiction such as the US Securities and Exchange Commission or the Financial Conduct Authority.
Australia
Answer ... Alternative investment funds (AIFs) can be marketed to both wholesale clients and retail clients. If marketed to retail clients, the fund must be registered, and will be regulated, as a registered scheme and require a product disclosure statement. Depending on the type of AIF, the Australian Securities and Investments Commission (ASIC) has new powers under which it may deem the marketing of an investment in such a fund to retail clients as inappropriate and exercise its intervention powers.
Australia
Answer ... The marketing rules are set out in the Corporations Act 2001 and ASIC policy. For example, in the case of an offer to retail clients, the marketing cannot be undertaken unless and until a disclosure document (called a ‘product disclosure statement’) is available and the marketing materials refer to that document and the importance of investors obtaining a copy of and reading that document.
Australia
Answer ... In the case of marketing generally – whether to wholesale clients or retail clients – ‘misleading and deceptive conduct’ rules apply. These rules apply for all kinds of funds, whether alternative or not; but in the case of AIFs, they will be more closely scrutinised (especially if offered to retail clients), to ensure that investors are not given information that is misleading or deceptive (whether by inclusion or omission).
Offers to wholesale clients do not require a product disclosure statement, but will usually be made in the same way as they are made in many other jurisdictions – namely, using an information memorandum (or private placement memorandum), which is a private offering document and does not have prescribed content.
Wholesale clients comprise certain institutional, sophisticated and professional investors that meet relevant criteria prescribed by the Corporations Act 2001. For example, a person who provides an accountant certificate certifying net worth of at least A$2.5 million (or annual gross income of at least A$250,000 for the last two years) may qualify as a wholesale client. It is anticipated that ASIC will in due course tighten up aspects of the wholesale client definition.
Australia
Answer ... Fund managers from outside Australia cannot actively market their fund in Australia unless they hold an AFSL or operate under an exemption. A new regime will be in place from 1 April 2020 for foreign fund managers to apply for a foreign AFSL as noted in question 4.4.
Australia
Answer ... Local marketing entities that hold an AFSL will be the only entities permitted to promote and distribute the fund and engage with clients and investors unless the foreign fund manager or fund promotor holds an AFSL or a foreign AFSL, or benefits from other exemption.
Australia
Answer ... Foreign AIFs can typically be offered to wholesale clients in Australia without much restriction (subject to the licensing rules and the regulation of marketing activities and market conduct rules). In practice, foreign AIFs are rarely offered directly to retail clients in Australia, as there are many layers of regulation which apply to retail offerings, including stricter Australian licensing requirements and the need for the fund to be registered with ASIC.
ASIC has recently been provided with additional product intervention powers, which are aimed at regulating some product architecture. Additional design and distribution regulations will take effect in early 2021 and will require financial product issuers and distributors to have a customer-centric approach to designing, marketing and distributing financial products to retail customers. This will enable ASIC to prevent the offering of certain types of funds to retail investors where those funds are not suitable for retail investors (which could arise in the case of a complex investment fund that has limited withdrawal rights). The issuer and distributor will be required to identify the target market by making a target market determination for that product, and ensure that the product is distributed only to that market segment.