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AUTHOR: CLERKIN LYNCH

DATE PUBLISHED 11/07/2022

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Pre Marketing of Investment Funds: Updated Guidance

The EU’s new regulatory framework facilitating the cross-border distribution of
collective investment schemes took effect on 2 August 2021. EC Directive
2019/1160 and Regulation 2019/1156 are designed to assist in the removal of
barriers to cross border investments within the EU, to harmonise the varying
regulatory systems across EU Member States, and to introduce new marketing and
information provision requirements for funds. While the Regulation has been
directly effective across EU Member States since 1 August 2019, the provisions
of the Directive were transposed into Irish law by the EU (AIFM) (Amendment)
Regulations 2021 (S.I. No. 414 of 2021). In this article we examine the impact
of these new rules, with a specific focus on the changes to be noted prior to
commencing pre-marketing of potential AIF’s.

Pre-Marketing Stage

The Directive establishes new parameters within which EU AIFMs (only) may
‘pre-market’, 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 EU in order to test their
interest in an AIF which is not yet established”.

Under the Directive, in order to be considered ‘pre-marketing’, an activity must
fall within the above definition and satisfy the following conditions:

1. it must not amount to an offer or placement and whilst draft documents can be
distributed to potential investors, no subscription documents can be provided;
2. draft documents should be clearly marked as such and explicitly state that
all information provided at the pre-marketing stage is incomplete, subject to
change and should therefore not be relied upon; and
3. AIFMs shall be required to document all pre-marketing activities and provide
an update to their local regulator detailing their pre-marketing activities
within 2 weeks of commencement.

This written notification must:

• Identify the EU Member States where pre marketing has commenced or is planned;
• Identify the AIFs and Sub Funds being pre-marketed (if any); and
• Set out the details of the pre-marketing including details of the relevant
investment strategies.

Other Changes

The Directive addresses other issues, such as a new procedure for notifications
of material changes of information filed for the marketing passport, within
specified timeframes depending on circumstances.

The Directive provides for a new procedure for discontinuing marketing.

The Regulation imposes similar standards of marketing communications on EU AIFMs
and UCITS. Fund marketing communications must: (i) be identifiable as such; (ii)
describe the benefits and risks of certain investment options; and (iii) not
contain misleading information.

Recommended Action:

It is advisable for fund managers intending to market to EU investors to review
their marketing processes and documentation, as well as cross-border facilities
to ensure that they are in compliance with the new requirements


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