European Commission proposes to clarify the meaning of pre-marketing under AIFMD

In March 2018, the European Commission released a proposal to amend the AIFM directive in order to provide further clarity as to what constitutes pre-marketing. The proposal, if accepted, should be adopted in May 2019, and should then be implemented into national legislative frameworks by May 2021.

Here are some highlights of the changes that the proposal puts forth.

How is pre-marketing currently defined under AIFMD?

There is currently no definition for pre-marketing and what counts as pre-marketing activities under present AIFMD regulations.

This lack of clarity has meant that local regulators have taken their own views on what should count as pre-marketing and what activities should be classed as marketing. This has, in turn, led to some frustration for fund managers, as the rules on when formal regulatory notifications are required differ across member states.

What are the new proposals by the European Commission?

The new proposals should provide further clarity to both local regulators and to fund managers, with the aim of harmonising approaches across the European Union.

Specifically, the proposals seek to introduce a formal definition of pre-marketing explained as follows.

‘Pre-marketing’ means a direct or indirect provision of information on investment strategies or ideas by an AIFM (or on behalf of one) to professional investors domiciled or registered in the Union, in order to test their interest in an alternative investment fund which is not yet established.

In addition, a new article has been proposed, which outlines the “Conditions for pre-marketing in the Union by an EU AIFM.”

This new article states that an authorised EU AIFM can undertake pre-marketing activities except where the information given to potential investors:

  • Relates to an established AIF
  • Contains reference to an established AIF
  • Enables investors to commit to acquiring units or shares of a particular AIF
  • Amounts to a prospectus, constitutional documents of a not-yet-established AIF, offering documents, subscription forms or similar documents whether in a draft or a final form allowing investors to make an investment decision

Further, the proposed article contains provisions for the following.

  • Member states shall ensure that no requirement to notify the competent authorities of pre-marketing activities is necessary for an EU AIFM to engage in pre-marketing activities.
  • Subscription by professional investors to units or shares of an AIF established following pre-marking in accordance with paragraph 1 or to the units or shares of AIFs managed or marketed by the EU AIFM that had engaged in pre-marketing of a not-yet-established AIF with the similar features shall be considered the result of marketing.

If you’d like to learn more about the proposed changes to pre-marketing under AIFMD, along with the other proposals contained within the European Commission’s release, you can read the full proposal document.

What kind of impact could these proposals have?

Broadly, these proposals should come as a necessary addition to the existing AIFMD regulations, with fund managers likely to be thankful for the additional clarity that the changes should bring. Equally, local regulators that currently have no pre-marketing regimes in place should also welcome the changes.

However, other member states may not accept the proposals as warmly. This is particularly the case in countries like the U.K., where often draft terms of a fund are sent to investors in advance of the fund actually being established. Under the European Commission’s proposals, such practices would not fall under the definition of pre-marketing.

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