AIFMD premarketing is again under the spotlight.
Further to a recent vote of the Economic and Monetary Affairs Committee (ECON) of the European Parliament last December 4th 2018, a draft report on the March 2018 legislative proposals from the European Commission for a Regulation and a Directive on the cross-border distribution of collective investment schemes was approved and sent to the European Parliament. Please find the draft report here.
AIFMD premarketing and the 18 months rule
The main approach adopted in the voted draft report is to ensure that, on the one hand, premarketing remains a possibility whilst, on the other, it is prevented that any such strategies can be used for the purpose of invoking reverse solicitation and de facto circumvent compliance with AIFMD.
This goal in the eyes of ECON can be attained by simplifying the conditions for premarketing whilst at the same time introducing more structure and regulation around it. A further proposal is made to the Parliament to introduce a process similar to a notification process for premarketing activities, both with the home state authority of the AIFM and the host state authorities where premarketing will actually take place, as well as a time-frame for AIFMD premarketing activities in light of reverse enquiry.
ECON proposes to modify recital 11 of the directive amending the UCITS and AIFM directive as well as specify further obligations in relation to AIFMD premarketing by means of introducing an additional recital 11(a).
The new version of recital 11 accordingly contains the new 18 months rule. Investors approached by managers using AIFMD premarketing, within a period of 18 months from the said approach, can acquire units or shares in such AIFs object of such AIFMD premarketing activities and whose reference is contained the documentation actually used by the manager as part of the AIFMD premarketing activities carried out, or established as a consequence of such activities, only in the context of an offer authorised under AIFMD article 31 or 32.
According to recital 11(a) AIFMs should also ensure that information relating to their premarketing activities is available and provided upon request to their competent authorities after these have taken place. The information should include a reference to the Member States and the period of time in which the AIFMD premarketing activities tool place, with a description of the investment strategies or ideas presented in the course of such AIFMD premarketing activities.
It is also rumoured that the material and information used for premarketing activities will have to be notified in advance both to the home state authority of the AIFM and the host state authorities of the domiciles where any such AIFMD premarketing activities are carried out.
Progressively after the advent of AIFMD in 2011 things have become less and less casual around marketing of alternative investment funds, first with the introduction of the AIFM directive and the passport for marketing and now with all the attention focused on premarketing activities. There is still some time before the proposed directive will be enacted, if it ever will be, and it will be very interesting to see what type of practice will develop surrounding the newly proposed 18 months rule and if that will be able to effectively tackle the issue surrounding reverse solicitation and circumvention of the provisions of AIFMD.