Local Facilities and PRIIPs KIDs. The offering of AIFs to Italian Semi Professional Investors
A recently enacted amendment of some Italian sector legislation paves the way to offer AIFs to a new category of qualified retail investors in Italy. We refer to the provisions under the now amended ministerial decree n. 30 2015, which will open investments into AIFs to a new category of Italian-qualified retail investors. These are the upper – white collar – Italian retail investors, who will be able to invest in AIFs under the new provisions, subject to a specific threshold for initial investments as well as a certain size of existing portfolio, amongst other requirements. Even though not expressly defined as such under the relevant Italian legislation, we may want to call this new category as Italian semi-professional investors.
This legislative change and the introduction of this new category of investors also comes at the same time when the relevant Italian sector regulation, namely the Consob Regulation on Issuers, is amended to cater for the transition to PRIIPs KIDs for funds offered to retail investors in Italy. As it is often the case, also in other European domiciles, the offer of AIFs to Italian semi-professional investors comes accordingly with some specific additional safeguards, including the requirement for AIFMs to make available in Italy local facilities and PRIIPs KIDs documentation.
Get in touch here with your contacts at Veneziano & Partners to see how we can help with offering AIFs to Italian Semi Professional Investors.
The Old Adage on Retail Investors Under AIFMD
Under AIFMD, there are provisions governing the marketing of AIFs to investors other than the ones of the professional type. We should be used by now to the old adage that AIFs can be marketed cross border in Europe to retail investors only in cases where that type of investors is allowed to invest in that AIF in its home state. Most typically, when retail AIFs are marketed cross border in Europe, local laws and regulation of host member states impose additional formalities, including a local authorisation process, for these AIFs to be marketed to local retail investors.
The paradigm is slightly different for what concerns the offer of AIFs to Italian semi-professional investors. On the one hand, indeed the constitutional and offering documents of AIFs should specifically allow for the offer to this category of investors and not be restricted to the traditional type of professional investors. On the other, whilst additional formalities are indeed introduced by Italian regulation, as we will see further down, there is no requirement for a second-leg direct authorisation process with the Italian regulator, following the passport under the AIFMD, as it is the case for true retail investor AIFs.
The Marketing Passport for AIFs Offering to Italian Semi-Professional Investors
The process governing the marketing authorisation of European AIFs to Italian semi professional investors is then relatively straightforward and relies on the marketing passport application under AIFMD, to be made via the home state authority of the AIFM. The application should identify the type of Italian semi professional investors intended to be targeted by the marketing activities as well as specify how the additional requirements imposed by the relevant Italian sector regulation will be discharged. Here we refer to the obligation to make available local facilities in Italy, imposed under the Consob Regulation on Issuers, as well as the production of PRIIPs KID.
For what concerns PRIIPs KIDs, we already discussed the issue of the ex-ante notification requirements. Whilst these documents should be produced and included in the marketing passport authorisation already, these should be also notified directly with Consob under the PRIIPs regulation ex-ante notification requirement implemented in Italy. The timing of this separate filing is as soon as the marketing passport has been obtained and in advance of making available the AIF to Italian semi-professional investors. Far from being extremely complex, this process is indeed labour intensive though. As mentioned already, the Consob system requires that data and information taken from the PRIIPs KIDs document are inserted in the database system of the Italian regulator.
The Offer of Local Facilities
The marketing passport application should also contain an indication of the local facilities made available for the Italian semi professional investors being targeted as part of the marketing endeavours in Italy. The already mentioned Consob Regulation on Issuers provides that in case of offer to Italian semi professional investors, the AIFM should make available, also electronically and online, local facilities where investor can obtain in Italian all the relevant information and documentation about the AIF.
On the specific point of the local facilities, clarification is required in light of the distribution dynamics traditionally in play in the Italian market. Whilst each distribution channel will dictate the choice of the entity in charge of dealing with subscriptions, redemptions and conversion requests – which are part of the services offered by the local facilities – we find that not all the tasks included in the traditional definition of local facilities will be necessarily discharged by these entities. Accordingly, where the AIFM does not want to take on the burden of making the documents and other information available to Italian investors, this is where a third-party digital facilities agent comes into play. On this specific point, the Consob Regulation on Issuers is clear that the functions under the local facilities can be shared between the AIFM and third parties.
Conclusions
The regime introduced for the offer of AIFs to Italian semi-professional investor does not pose challenges per se, even less so for managers acquainted already with the local market and the dynamics involved in the distribution of investment funds in Italy.
Get in touch here with your contacts at Veneziano & Partners to see how we can help with Italian Semi Professional Investors.