New Rules For 'Pre-Marketing' Funds - Effect On Guernsey And Jersey AIFMs

Author:Mr Ben Morgan (Guernsey), Robert Milner and Leonie A Corfield
Profession:Carey Olsen

The Cross Border Distribution Directive ("Pre-Marketing Directive") amends the Alternative Investment Fund Managers Directive ("AIFMD"). Member States have until 2 August 2021 to amend their legislation to include the new rules.

The Pre-Marketing Directive provides for a uniform approach to the "pre-marketing" of alternative investment funds ("AIFs") within EU Member States. Member States do not currently have a uniform approach as to what constitutes "marketing" under the AIFMD. What one Member State construes as "premarketing" might be "marketing" in another Member State. Consequently, the point at which the AIFMD rules on "marketing" are triggered currently differs across Member States. This has meant that AIFMs have ruled out certain jurisdictions for test marketing. Historically, managers have not wanted to incur the cost of making regulatory filings to market AIFs, if they have not had a chance to gauge the level of investor interest in a prospective fund.

What is "pre-marketing"?

"Pre-marketing" under the Pre-Marketing Directive is the provision of information or communication on investment strategies or ideas to potential professional investors in the EU to test their interest in an AIF or potential AIF. Whilst the exact scope of information permissible beyond the provision to prospective investors of investment strategies or ideas under "pre-marketing" is uncertain, any such materials must be insufficient (i) to allow potential investors to commit to the investment, (ii) to amount to subscription documentation (whether draft or final) or (iii) to amount to constitutional documents, a prospectus or offering document.

New filings

An EU AIFM will be obliged to notify its home member state regulator of any pre-marketing within two weeks of its commencement. For jurisdictions like the UK, which currently permit pre-marketing without any regulatory filings, this creates much more regulatory formality.

No reverse solicitation if pre-marketing has occurred?

Where a subscription takes place within 18 months of the AIFM beginning pre-marketing, the subscription will be deemed to have been the result of marketing, which then...

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