Directive on cross-border distribution and innovations for the summer – Finance and Banking
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_Current situation: As of August 2, 2021, a uniform interpretation of the definition concerning pre-marketing will come into force by Directive (EU) 2019/1160 of the European Parliament and of the Council of June 20, 2019 amending Directives 2009/65 / EC and 2011/61 / EU with regard to the cross-border marketing of undertakings for collective investment (“Directive 2019”) and Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 facilitating the cross-border marketing of undertakings collective investment scheme (“2019 regulations”).
With regard to the marketing of units or shares of an alternative investment fund (“FIA“) in the EU by its alternative investment fund manager (“AIFM“), it is important to note that it is to date subject to the provisions of chapter 6 of the law of 12 July 2013 on alternative investment fund managers, as amended (the”Law of 2013“).
Under the 2013 law, marketing is defined as “a direct or indirect offer or placement, at the initiative of the manager or on behalf of the manager, of units or shares of an AIF that he manages, to or from investors domiciled or having their registered office in the European Union. “
Thus, it generally happens that the manager proceeds to the marketing of units or shares of an AIF. According to the law of 2013, neither the AIF itself, nor its management in company law and / or the initiator have the right to resume the marketing of units or shares of the AIF. However, in accordance with Article 1 (9) of the Law of 2013, the manager may delegate the marketing function in part, depending on the option / possibility chosen, to a third party, provided that this third party holds the necessary license to be able to market the units or shares of the AIF. Under Luxembourg law, to be eligible for marketing, a person must hold an authorization, in accordance with article 24-7 of the law of 5 April 1993 on the financial sector, as amended.
In addition, the possibility of what is called “reverse solicitation” exists in Luxembourg law. This possibility is not regulated by law, but is listed in the FAQ of the Luxembourg Financial Supervisory Authority (“CSSF“) with regard to the Law of 2013 (“Faq“) in point 21.I. Accordingly, for something to be considered a” reverse solicitation “two points must be established: (i) the potential investor has approached the manager and / or the AIF and ( ii) neither the AIF nor the AIFM AIF has had any prior contact with such an investor. The “reverse solicitation” would therefore not be considered as marketing within the meaning above and would therefore not require any license. The burden of proof of a “reverse solicitation” lies with the AIFM, which can be proven, among other things, by the potential investor signing a letter confirming that he has approached the manager.
In addition, the concept behind what is called pre-marketing has been of particular importance to this day and is a widely used tool for “no marketing”. It should be noted that several Member States have not yet explicitly provided for the concept of pre-marketing and the associated requirements. This is also the case for Luxembourg until the implementation of the 2019 directive.
Consequently, Luxembourg law has not yet regulated whether, and if so to what extent, pre-marketing can be carried out and by whom.
The FAQs also do not provide specific explanations on the presentation of pre-marketing in Luxembourg law. However, point 21.B of the FAQ specifies that the submission of draft documents relating to an AIF managed by a manager to potential investors does not constitute a marketing activity, unless the draft documents can be used by potential investors to formally subscribe or undertake to subscribe for units or shares of the AIF.
Thus, the legal framework around marketing or “no marketing” with pre-marketing has so far been quite favorable, in particular there is a lot of room for interpretation.
The new provisions mainly introduce innovations in the field of pre-marketing. However, other issues are addressed in the context of the Directive, such as the new provisions on the revocation of arrangements made for the marketing of units or shares of all or part of EU AIFs in other Member States. the home Member State of the manager. In addition, it is stated that an AIFM must provide facilities in each Member State in which it intends to market units or shares of an AIF to retail investors which facilitate, among other things, the processing of information on the exercise of investors’ rights arising from investments in AIFs in the Member State in which the AIF is marketed.
While the 2019 Directive adapts other legal bases, which in turn require implementation into the respective national law, the Regulation is directly applicable in the Member States.
Within the framework of Directive 2019, Directive 2011/61 / EU of the European Parliament and of the Council of 8 June 2011 relating to alternative investment fund managers (“Directive 2011”), in particular, must then be amended accordingly. now contain an explicit reference to pre-marketing.
Consequently, pre-marketing is considered to fall under the new definition of the 2011 directive:
- the provision by or on behalf of an EU manager, directly or indirectly, of information or communications on investment strategies or investment concepts to potential professional investors domiciled or having their registered office in the EU;
- in order to determine the extent of this participation in an AIF or a sub-fund which is not yet registered or which is registered but has not yet been the subject of a marketing notification under Article 31 or 32 in the Member State where the potential investors are domiciled or have their registered office;
- it being understood that this is in no way an offer or a placement with a potential investor to invest in units of this AIF or sub-fund.
According to the modifications to be made to the 2011 directive, a certain level of pre-marketing activities by (only) the AIFM concerning the structure to be set up is therefore authorized, provided that the following conditions are met:
In addition, it should be noted that a subscription made by professional investors in the eighteen (18) months following the start of the pre-marketing by the manager, which is linked to the pre-marketing activities carried out by the manager , must be considered as a result of the commercialization and must be declared in accordance with the regulations of Directive 2011.
This also implies that within the period of eighteen (18) months, the professional investor cannot invoke the notion of “reverse solicitation” already mentioned above. It should be noted that this also applies to indirect pre-marketing.
The 2019 directive speaks of pre-marketing to professional investors, but does not address other types of investors, which raises the question of whether or not the new pre-marketing rules apply to these investors, such as semi-professional investors (in Germany) or retail investors. In addition, the 2019 directive did not address non-EU fund managers, which may be an open question in some Member States.
In the framework of the 2019 regulation, the points concerning marketing advertising, transparency, fees, etc. are, among other things, dealt with in more detail. The regulation came into effect on August 1, 2019, although some articles and paragraphs will not come into effect until August 2, 2021, such as the requirements for marketing ads.
The 2019 Directive amending, among other things, the 2011 Directive found its expression for implementation in Luxembourg in draft law number 7737 (“Law Project“), which has yet to be voted on. It remains to be seen whether an implementation will take place on time. Indeed, Member States are required to transpose the directive into national law by 2 August 2021 .
The bill essentially enacts 1: 1 regulations. The questions around non-professional investors remain open; but it is specified that the 2019 directive will also apply to non-EU managers.
The new regulations and in particular the associated definition of the term pre-marketing are a clarification for the marketing sector, as it fills the void that previously prevailed in this area. Now, however, the wiggle room around pre-commercialization is eroded and filled with clear rules of the game, which unfortunately leaves the non-AIFM player in the cold. More precisely, it means; the deadline of August 2, 2021 should be exploited for sale purposes, otherwise there is an obligation for unregulated players to regulate in the event of a sale. However, it remains to be seen how Luxembourg will deal with pre-marketing from August (as the bill has not yet been voted on and the directive will, in our opinion, be directly applicable from then on).
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.