The new pre-marketing regime for EU AIFs
- Financial Market Regulation
With Directive 2019/1160/EU (“CBDF Directive”), the EU legislator has adopted a unified pre-marketing regime for EU AIFs. Already under the current legal situation, it is permissible to approach potential investors before the requirements for marketing are met, as long as the potential investor is not provided with all information enabling him to make an investment decision in a specific AIF (so-called “pre-marketing”). The CBDF Directive harmonizes the requirements for pre-marketing and restricts the possibility to engage in passive marketing after pre-marketing. The new rules do not affect all fund managers equally.
According to the Directive on Alternative Investment Fund Managers (“AIFMD”) and its Austrian implementation, the Alternative Investment Fund Managers Act (“AIFMG”), (active) marketing of alternative investment funds (“AIF”) in Austria generally requires prior authorisation by the Austrian Financial Market Authority (“FMA”) pursuant to Sec 29 AIFMG, a marketing notification pursuant to Sec 31 or Sec 38 AIFMG or an authorisation by the FMA pursuant to Sec 47 AIFMG. However, already under the current legal framework, marketing in Austria occurs only if the potential investor is provided with all information required to make an investment decision in a specific AIF. Thus, already the current legal framework permits to approach potential investors prior to fulfilling these requirements, as long as no marketing takes place (so-called “pre-marketing”).
With the CBDF Directive, the EU legislator introduced a harmonised pre-marketing regime for EU AIFs. The CBDF Directive had to be implemented by 2 August 2021. However, the Austrian legislator did not meet this deadline. So far, only a draft amendment (“DA”) of, among others, the AIFMG has been published, which would implement the new pre-marketing regime mainly through a new Sec 2(1)(43) and a new Sec 28a AIFMG.
How is pre-marketing defined?
According to the DA, pre-marketing is defined as “provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or with a registered office in the Union in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF or compartment”.
Accordingly, the new rules only apply to alternative investment fund managers authorised in the EEA (“EU AIFM”). According to other provisions of the DA they are only applicable to AIFs established in the EEA (“EU AIFs”).
Requirements for information presented
The information presented to potential (professional) investors must meet certain negative requirements. It must not
- be sufficient to allow investors to commit to acquiring units or shares of a particular AIF, thus not be an offer capable of being accepted;
- include subscription forms or similar documents whether in a draft or a final form; or
- include constitutional documents, a prospectus or offering documents of a not-yet-established AIF in a final form.
Where a draft prospectus or offering documents are provided, they must not contain information sufficient to allow investors to take an investment decision and must contain certain disclaimers.
It follows from the requirements for the presentation of constitutional documents, prospectuses or offering documents that apply to AIFs which have not yet been established, that constitutional documents, prospectuses or offering documents of an AIF that is already established must not be presented in any form.
Pre-marketing and reverse solicitation
In principle, the AIFMG does not restrict the passive marketing of AIFs (so-called “reverse solicitation”). The following rules are introduced regarding the question whether pre-marketing excludes subsequent passive marketing of an EU AIF:
Professional investors contacted in the course of the pre-marketing of an EU AIFM may only acquire units or shares of the EU AIF to which the pre-marketing related after an authorisation pursuant to Sec 29 AIFMG or a marketing notification pursuant to Sec 31 AIFMG. The same generally applies to any subscription to the EU AIF made by professional investors within 18 months of the commencement of pre-marketing. Thus, invoking reverse solicitation is PERMANENTLY excluded in respect of contacted investors and, within the 18 months, also in relation to non-contacted professional investors.
After expiry of the 18 months, the question whether a non-contacted professional investor acquires within the scope of passive marketing is to be determined according to general rules. Equally, the question of whether a permissible passive marketing to private clients occurs is not affected by the new rules.
What changes for whom?
The new pre-marketing rules apply to EU AIFs managed by licensed (= authorised) EU AIFMs. The impact is therefore not the same for all AIFMs/AIFs:
Impact/New requirements for AIFM licensed in Austria
- The new rules apply (only) to the pre-marketing of EU AIFs within Austria and the EEA;
- only potential professional investors may be approached in the context of pre-marketing, and under no circumstances private clients;
- the pre-marketing must be adequately documented (the DA does not specify what constitutes adequate documentation);
- the AIFM licensed in Austria shall inform the FMA in writing within two weeks after the start of the pre-marketing (the FMA subsequently informs the competent authorities of those other Member States in which the pre-marketing takes place or has taken place);
- the pre-marketing rules also apply to AIFs (special funds, other special assets, pension investment funds) established under the Austrian Investment Fund Act 2011.
The notification referred to in point 4 must contain certain specified information.
Impact/New requirements for AIFMs authorised in other Member States
For EU AIFMs authorised in other Member States, the same rules apply mutatis mutandis to pre-marketing in Austria as for AIFMs licensed in Austria.
Implications for registered AIFMs
The new pre-marketing rules of the DA do not apply to AIFMs merely registered in Austria or other Member States. AIFMs registered in Austria may therefore (as before) market funds on a restricted basis and engage in pre-marketing according to general rules. The requirement for AIFMs registered in Austria to notify each launch of an AIF without delay (Sec 1(5)(5) AIFMG) remains unaffected. For the pre-marketing of EuVECA and EuSEF, Regulation (EU) 1156/2019 with effect from 2.8.2021 introduced an identical pre-marketing regime as the one adopted by the CBDF Directive, which must also be complied with by registered AIFMs. As before, AIFMs (merely) registered in other Member States may not market funds in Austria, with the exception of EuVECA or EuSEF.
Implications for AIFMs and AIFs from third countries
The new pre-marketing regime only applies to EU AIFs managed by EU AIFMs. However, recital 12 of the CBDF Directive requires that EU AIFMs should not be disadvantaged compared to non-EU AIFMs. It can therefore be assumed that activities of an EU AIFM in relation to a third-country AIF and activities of a third-country AIFM in relation to an AIF require prior marketing authorisation (pursuant to Sec 38 or Sec 47 AIFMG) if, in the case of an EU AIF managed by an EU AIFM, these activities would under the newly introduced pre-marketing regime only be permissible after an authorisation of the EU AIF by the FMA or a marketing notification (pursuant to Sec 29 or Sec 31 AIFMG). This also applies to the question of whether reliance on passive marketing is possible.
Overall, this legal situation makes pre-marketing by third-country AIFMs unattractive, as passive marketing to contacted investors is no longer possible and passive marketing to (professional) investors is not possible for at least 18 months after pre-marketing and the marketing authorisation (pursuant to section 47 AIFMG) required as a consequence has proven to be prohibitive in practice. (Since the AIFMG came into force in 2013, not a single such marketing authorisation has been issued.)
With our comprehensive expertise in the area of financial market law and supervisory procedures, we will be pleased to support you in case of doubt or in implementing the requirements of the new pre-marketing regime.
Please note: This blog merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the blog.