On 2 August 2021, the European Commission's new framework for the ×-border distribution of investment funds came into effect (the "CBDF"). This framework, comprising of a Directive1 and accompanying Regulation2, has the objective of removing regulatory barriers that were identified as significant disincentives to UCITS management companies and AIFMs ("Managers") who wish to avail of the marketing passports for both UCITS and AIFs. Our advisory series considers a number of the key changes being introduced by the CBDF legislation. This final part of our advisory series focuses on the changes to the marketing notification processes for UCITS and AIFMs.
Amendments to the marketing notification process
While the changes, introduced by the CBDF and to be transposed into national law in each member state, to the letters to be submitted as part of the marketing notification process are relatively minor, more significant are the changes to the process for submitting amendments to a UCITS marketing notification, particularly, the introduction of a one month notice period prior to making any changes to the information provided as part of the initial notification. The legislation specifically calls out changes relating to the share classes to be marketed in a host member state as falling within the category of changes to which this notice period will apply.
Under the existing regime, the process relating to amendments to the information contained in the UCITS marketing notification involved liaising directly with the national competent authorities in each member state in which the fund was registered to market to advise of the amendment being made. As set out below, going forward such amendments also need to be provided to the home competent authority.
| Changes being introduced by CBDF | UCITS | AIF | |
| 1. |
Notification letter to be updated to include:
|
✔ | ✔ |
| 2. | Changes in information in the original notification letter or a change regarding the share classes to be marketed to be submitted to the home and host competent authorities at least one month before the implementation of the change. | ✔ | ✖ |
| 3. |
Where as a result of a change referred to in 2 above the UCITS would no longer comply with the UCITS Directive, the home competent authorities will inform the UCITS within 15 working days of receipt of the notification referred to in 2 above that it is not to implement that change and the home competent authorities must notify the host competent authorities accordingly. Where a change referred to in 2 above is implemented after information has been transmitted in accordance with the above sub-paragraph and as a result of the change the UCITS no longer complies with the UCITS Directive, the home competent authorities can take all appropriate measures in accordance with the UCITS Directive, including, where necessary, the express prohibition of marketing of the UCITS. The home competent authorities must notify the host competent authorities without undue delay of any such measures taken. |
✔ | Similar requirement introduced, see 4 below. |
| 4. |
If, pursuant to a planned change, the AIFM's management of the AIF would no longer comply with AIFMD or the AIFM would otherwise no longer comply with AIFMD, the home competent authorities shall inform the AIFM within 15 working days of receipt of all the information relating to a change that it is not to implement the change. In that case, the home competent authorities will notify the host competent authorities accordingly. If a planned change is implemented notwithstanding the above, or if an unplanned change has taken place pursuant to which the AIFM's management of the AIF would no longer comply with AIFMD or the AIFM otherwise would no longer comply with AIFMD, the home competent authorities must take all due measures, including, if necessary, the express prohibition of marketing of the AIF. The home competent authorities must notify the host competent authorities accordingly without undue delay. If the changes do not affect the compliance of the AIFM's management of the AIF with AIFMD, or the compliance by the AIFM with AIFMD otherwise, the home competent authorities shall within one month inform the host competent authorities of those changes. |
✖ | ✔ |
For AIFMs, the existing process for notifying changes to the
information submitted as part of the initial marketing notification
process remains unchanged. By way of reminder, an AIFM is only
required to notify its home competent authority of material changes
to the information provided as part of the initial marketing
notification and the time frame is at least one month before
implementing a planned change or immediately after an unplanned
change has occurred. It is worth noting that ESMA's AIFMD
Q&As3 clarify that the establishment of a new share
class in a fund for which a marketing notification has already been
made does not constitute a material change to that
notification.
Next steps
The key consideration for Managers in relation to the changes to the marketing notification process is the one month notice period introduced for UCITS in respect of amendments to any of the information included in the initial notification letter. Marketing procedures will need to be updated to factor in this timeframe. This is particularly important to bear in mind in putting together a timetable for the launch of a new share class.
Footnotes
1. Directive (EU) 2019/1160, which has been transposed into Irish law by way of amendments to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 and the European Union (Alternative Investment Fund Managers) Regulations 2013.
2. Regulation (EU) 2019/1156
3. Section II Q&A 6
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
