Proposed EU Regulation for Fund Marketing Before the Launch of Alternative Investment Funds
New Pre-Marketing Regime Simplifies EU Fund Marketing, Complicates Third-Country Access
The European Commission's Capital Markets Union (CMU) initiative is set to revolutionise Europe's cross-border capital market, offering new financing opportunities for Small and Medium-sized Enterprises (SMEs) and investment prospects for retail savers. A key aspect of this transformation is the introduction of a harmonised pre-marketing regime for Alternative Investment Fund Managers (AIFMs) across the European Union (EU).
The pre-marketing concept, introduced under the Cross-Border Distribution of Funds (CBDF) Directive, amends the Alternative Investment Fund Managers Directive (AIFMD). Pre-marketing, as defined, refers to the preliminary provision of information or communication to test investor interest in an AIF strategy that is not yet established or not yet notified for marketing, without amounting to an offer or placement.
Implications for Third-Country (Non-European) Fund Managers
The harmonised pre-marketing rules primarily apply to EU AIFMs marketing under the passport regime. These rules require conditions to be met before marketing formally begins under the passport. However, a key recital in the CBDF Directive prohibits national rules from disadvantaging EU AIFMs relative to non-EU AIFMs. This implies that Member States cannot impose stricter pre-marketing restrictions on non-EU AIFMs than those applying to EU AIFMs.
Some EU Member States may apply similar pre-marketing rules to non-EU AIFMs under their national private placement regimes (NPPRs). This impacts third-country fund managers seeking to offer their investment strategies to European professional investors, as they may be subject to state-level pre-marketing regulations echoing the EU harmonised regime.
Since the UK has not adopted the EU’s CBDF pre-marketing regime post-Brexit, UK AIFMs marketing into the EU are affected by these national implementations. The position for other third-country managers depends on the interplay between EU passport rules, NPPRs, and their home country regulations.
Third-country fund managers must be aware that “pre-marketing” communications do not constitute an offer or placement. Therefore, they must carefully adhere to definitions to avoid breaching marketing rules. Testing investor interest before formal marketing starts is possible but tightly regulated.
Future clarifications and practical implementation guidance from national regulators and ESMA may affect how strictly pre-marketing rules are enforced on third-country managers.
Summary Table of Implications for Third-Country Fund Managers
| Aspect | Implication | |--------------------------------------|---------------------------------------------------------------| | Applicability of pre-marketing rules | Harmonised rules explicitly for EU AIFMs but influence NPPRs applied to non-EU AIFMs in some Member States. | | National rules on pre-marketing | Cannot discriminate against EU vs non-EU AIFMs but implementation may vary. | | Marketing under NPPR | Third-country managers may be subject to national pre-marketing rules when marketing into the EU. | | Definition of pre-marketing | Communication to gauge investor interest without formal offer/placement; must be carefully complied with. | | Brexit impact | UK fund managers lose passport, so affected differently; other non-EU managers face mixed national approaches. |
In conclusion, the new pre-marketing regime brings regulatory clarity for EU AIFMs but creates a complex landscape for third-country fund managers, who must navigate both EU harmonised rules (where relevant) and varying national pre-marketing regimes for marketing their investment strategies to European professional investors. This requires diligent compliance efforts and attention to evolving regulatory guidance.
- Due to the harmonised pre-marketing rules, third-country fund managers may encounter various national pre-marketing regulations when marketing their investment strategies to European professional investors.
- The refined pre-marketing regime, while simplifying EU fund marketing, complicates third-country access as non-European fund managers may need to adhere to both EU harmonised rules (where applicable) and differing national pre-marketing regulations.
