On 2 August 2021, the European Commission's new framework for the cross-border distribution of investment funds came into effect (the "CBDF"). This framework, comprising of a Directive1 and accompanying Regulation2 , has the objective of removing regulatory barriers that were identified as significant disincentives to UCITS management companies and AIFMs ("Managers") who wish to avail of the marketing passports for both UCITS and AIFs. Our advisory series considers a number of the key changes being introduced by the CBDF legislation. This third part of our advisory series focuses on the amendments relating to the provision of facilities in host member states.
End to the need for a physical presence to make available local facilities
With a view to aligning the AIFMD and UCITS frameworks, the same marketing facilities requirement has been introduced in AIFMD3 by the Directive with respect to AIFMs marketing AIFs to retail investors (noting this requirement does not apply where marketing to professional investors) in the EU. The CBDF introduces amendments to both the UCITS Directive4 and AIFMD which provide that member states shall not require Managers:
- to have a physical presence in a jurisdiction; or
- appoint a third party
in order to make available facilities in each member state in which the Manager intends to market:
- UCITS; or
- AIFs to retail investors.
These amendments clarify that such facilities should perform the following tasks:
Managers will be able to use electronic means of communication to perform the tasks listed above, which should allow for the provision of facilities out of one central EU location. Where a third party is appointed by the Manager to provide such facilities in one or more member states, the Manager should ensure that:
(i) the third party is subject to regulation and supervision governing the tasks to be performed; and
(ii) a written agreement is in place which specifies:
- which tasks are to be performed by the third party; and
- that the third party will receive all the relevant information and documents from the Manager to perform such tasks.
The option for the Manager to perform certain of the tasks listed above while appointing a third party to assist with the remainder of the tasks is specifically called out in the legislation. This provides flexibility to Managers going forward in respect of the facilities arrangements they have in place.
Next steps
While the CBDF provides greater flexibility to Managers in terms of the facilities arrangements in member states where marketing takes place or is intended to take place, implementing legislation is needed in each member state in order to facilitate these changes. Now is an opportune time for Managers to consider their current facilities arrangements and examine whether any changes could be made to streamline the existing arrangements. Where changes are being made, such as where physical facilities are now being removed, or indeed being provided for the first time in the case of AIFMs marketing to retail investors, it is important to consider the changes required to the detail included in the relevant passporting notification letters, for example, the address for the invoicing or the communication of any applicable regulatory fees, as well as information on the facilities for performing the required tasks.
Footnotes
1 Directive (EU) 2019/1160
2 Regulation (EU) 2019/1156
3 Directive 2011/61/EU
4 Directive 2009/65/EC
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.
