EU Legislative Package for Cross-Border Distribution of Investment Funds Published
07/12/2019A Regulation and a Directive aimed at facilitating the cross-border distribution of investment funds have been published in the Official Journal of the European Union. The Directive amends the Directive on Undertakings for Collective Investment in Transferable Securities and the Alternative Investment Fund Managers Directive by introducing new provisions and amending certain existing provisions of those pieces of legislation. The new Regulation aims to increase transparency on the rules and procedures applicable to cross-border marketing of investment funds and regulatory fees and charges levied by national regulators. Member states are required to transpose the Directive into national laws by, and apply those laws from, August 2, 2021. Certain provisions of the Regulation will apply directly across the EU from 1 August 2019, with the remaining provisions applying from August 2, 2021.
The Directive deletes certain provisions of the UCITS Directive or AIFMD that will be covered in the new Regulation. It also amends the existing texts, including:
- The requirements on UCITS for providing facilities to retail investors are amended to reduce the existing burdensome system, including restricting the ability of Member States to require a physical establishment for the provision of the facilities. The same rules are applied to AIFMs where a Member State allows them to market alternative investment funds to retail investors.
- The Directive also harmonizes the existing divergent approach to pre-marketing by AIFMs by inserting a definition of "pre-marketing" in AIFMD and setting out the conditions for pre-marketing. These provisions ensure that EU AIFMs are allowed to target investors by testing their appetite for upcoming investment opportunities or strategies through pre-marketing. The same conditions for pre-marketing are introduced for managers under the European Venture Capital Funds Regulation and the European Social Entrepreneurship Funds (these amendments are contained in the new Regulation and will apply from August 2, 2021). The European Commission is charged with assessing whether the pre-marketing regime in AIFMD should be implemented in the UCITS Directive and must report on its evaluation by August 2024.
- Conditions are set out for discontinuation of the marketing of a UCITS or AIF, harmonizing the existing divergent approaches across EU Member States.
- Finally, the Directive inserts a provision into the AIFMD requiring the Commission to report and submit legislative proposals, if appropriate, on whether the passport regime should be extended to non-EU AIFMs.
The new Regulation comprises:
- requirements on AIFMs, UCITS management companies and managers of EuVECA and EuSEF funds in respect of marketing communications (these provisions will apply from August 2, 2021);
- a new transparency framework for national provisions on marketing requirements, which will require national regulators to publish online all applicable national laws, regulations and administrative provisions governing marketing rules for AIFs and UCITS (these provisions will apply from August 2, 2021);
- provisions for national regulators on verification of marketing communications for UCITS and AIFs;
- common principles for fees or charges levied by national regulators; and
- responsibility for the European Securities and Markets Authority for developing and maintaining databases on national marketing requirements, regulatory fees and charges and notifications and, as part of the database on regulatory fees and charges, launching an interactive tool that would allow stakeholders to calculate the amount of regulatory fees for each Member State.
View the Directive.
View the new Regulation.
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