With effect as of 2 August 2021, new rules will come into force, harmonising for the first time the pre-marketing of interests in undertakings for collective investments (UCIs) within the EU.
At the same time, new rules on the future content of marketing material are implemented.
Both developments concern fully licensed capital management companies as well as EuVECA and EuSEF managers, which market or pre-market their products beyond 2 August 2021 to (potential) investors.
Executive Summary
As from 2 August 2021, new EU-wide uniform rules on pre-marketing will replace the so far inconsistent national approaches.
In addition to a new definition of the term "pre-marketing", a formalised notification procedure will be introduced, which AIFMs, EuVECA and EuSEF managers will need to comply with.
For UCIs regularly marketed as from 2 August 2021, AIFMs and UCITS managers are obliged to comply with new requirements regarding their "marketing communications".
Marketing communications must be identifiable as such, describe the risks and rewards of an investment in an equally prominent manner, and be fair, clear and not misleading.
In particular the detailed specifications of ESMA on the content of marketing communications are expected to have a considerable effect on marketing documentation.
- Pre-Marketing
The concept of pre-marketing was introduced in 2019 in the context of a set of measures by the EU Commission aiming at a further harmonisation of marketing rules, through a Directive amending the AIFM Directive. It has recently been implemented into the German capital investment act (KAGB) by the law strengthening the fund market place ( Fondsstandortgesetz) (in German), effective as form 2 August 2021. It applies to AIFMs and, under the relevant Regulations, to EuVECA and EuSEF managers.
"Pre-marketing", in short, describes 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 in the EU in order to test their interest in an AIF which is not yet established or not yet notified for marketing in the respective Member State, and which in each case does not amount to an offer or placement to the potential investor to invest in the interests of that AIF.
The aim is to further regulate the phase before the actual marketing starts. Pre-marketing will now be allowed throughout the EU (in some Member States for the first time), but it requires a notification to the competent national authority within two weeks of having begun pre-marketing, providing certain information and documents.
It is crucial that AIFMs get acquainted with the new procedures, because there will be little room left for marketing-related communications with potential investors outside of the pre-marketing and marketing regimes.
It should further be noted that the new rules substantially limit the group of eligible third parties to conduct pre-marketing on behalf of the relevant manager: These must qualify as fully licensed AIFM or UCITS manager, credit institutions or MiFID investment firms.
For more information on pre-marketing please click here for our client information dated 15 March 2019.
- Marketing Communications
Overshadowed by the debates on pre-marketing, the new rules on marketing communications have gained very little attention so far. These are based on a directly applicable EU Regulation on facilitating cross-border distribution of UCIs, whose material marketing rules will likewise come into force on 2 August 2021.
The new obligations will apply to fully licensed AIFMs, UCITS managers, EuVECA and EuSEF managers.
They have been drafted in parallel with similar obligations within the MiFID universe, which so far affected fund managers by way of a reflex reaction, if at all. Going forward, marketing communications must always
- be identifiable as such;
- describe the risks and rewards of a UCI in an equally prominent manner; and
- generally be fair, clear and not misleading.
This seems to be not very problematic at a first glance, but for example many marketing presentations quite naturally focus on the rewards of an investment, while the risks are presented in the fine print, if at all.
The definition of marketing communications will be interpreted rather extensively. It will include nearly any advertising communication, including communication on websites and in social media, with the exception of legal and regulatory documents. Pre-marketing material is also excluded.
The recently published Guidelines of the European regulator ESMA, which are due to formally enter into force towards the end of 2021, contain some further guidance.
As from 2 August 2021, fully licensed AIFMs and UCITS managers as well as EuVECA und EuSEF managers should cross check any marketing material they intend to use (presentations, pitch books, teasers, LinkedIn messages, etc.) against the new obligations.
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.
