Shearman & Sterling LLP | FinReg | European Commission Publishes Legislative Package for Cross-Border Distribution of Investment Funds
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  • European Commission Publishes Legislative Package for Cross-Border Distribution of Investment Funds
    As part of its work on creating a European Capital Markets Union, the European Commission has published a legislative package of amendments, comprising a proposed Regulation and a proposed Directive.

    The proposed Directive amends the Directive on Undertakings for Collective Investment in Transferable Securities Directive and the Alternative Investment Fund Managers Directive by introducing new or amending existing elements of that legislation. This includes deletion or amendment of provisions of the UCITS Directive or AIFMD that are dealt with in the proposed new Regulation. The proposed Directive also inserts a definition of "pre-marketing" in AIFMD, which is designed to allow AIFMs to target investors by testing their appetite for upcoming investment opportunities or strategies through pre-marketing. Pre-marketing is defined as "a direct or indirect provision of information on investment strategies or investment ideas... in order to test [investor] interest" in an AIF that has not yet been established.

    The proposed 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 competent authorities. It comprises:
    • requirements on AIFMs or UCITS management companies in respect of marketing communications;
    • 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;
    • 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.
    The proposed Regulation also includes amendments to the European Venture Capital Funds Regulation and the European Social Entrepreneurship Funds Regulation, to introduce the concept of pre-marketing.

    The Commission believes that the proposed legislative package will eliminate current regulatory barriers and make cross-border distribution less costly. According to an impact statement published alongside the proposals, the proposed measures are expected to reduce costs for existing cross-border distribution by up to EUR 440 million annually.

    The Commission’s proposals will now be discussed by the European Parliament and the Council.

    View the proposed Directive.

    View the proposed Regulation.

    View the Impact Assessment.
    TOPIC: Funds