The European Commission has proposed a new directive to amend the Alternative Investment Managers Directive to standardise acceptable pre-marketing within the EU.
The current rules
Under the current arrangements, a fund may not be marketed to an EU-based investor unless the EU manager has obtained the marketing passport from its home regulatory authority or the non-EU manager has registered under the Article 42 third country regime.
When managers wish to test the waters with potential investors regarding new funds, they are faced with different “pre-marketing” regimes throughout the EU, ranging from countries which broadly allow the discussion with investors on most genuinely draft marketing documentation through to others which limit pre-marketing only to initial stage conversations. The European Commission proposes that EU managers should be permitted to engage in pre-marketing, which is defined as:
“a direct or indirect provision of information on investment strategies or investment ideas by an AIFM or on its behalf to professional investors domiciled or registered in the Union in order to test their interest in an AIF which is not yet established.”
This will, however, not permit the provision of information which:
- relates to an established AIF;
- contains reference to an established AIF;
- enables investors to commit to acquiring units or shares of a particular AIF; or
- amounts to a prospectus, constitutional documents or a not-yet-established AIF, offering documents, subscription forms or similar documents whether in a draft or a final form allowing investors to take an investment decision.
Although it is useful to have some form of uniform recognised concept of pre-marketing, there are various issues that come out of this proposal.
- The text refers only to pre-marketing by EU-based AIFMs. It is unclear whether the Commission is proposing that this should apply to non-EU AIFMs as well.
- The prohibition on the use of offering documents, subscription forms or similar documents will limit the pre-marketing activities in countries that currently permit the wider use of early stage material, such as the UK.
- Managers sometimes wish to establish the fund vehicle at an early stage for tax structuring reasons. This establishment of the partnership will presumably then hinder pre-marketing activities throughout the EU.
- The proposal makes clear that investments from investors following earlier pre-marketing will always be as a result of those initial contacts and that, therefore, the argument of reverse solicitation will not be permitted. This means that managers who wish to use reverse solicitation in any particular country should ensure that they do not undertake pre-marketing in these countries except as a result of any earlier reverse solicitation.
The draft proposal contains a proposed implementation date of two years after adoption, although member states may opt to incorporate the requirements earlier if they wish.