Most of our readers will be aware that, from 1 January 2021, non-EU fund structures do not benefit from any EU Marketing Passport under the Alternative Investment Fund Managers Directive ("AIFMD").
How are firms responding to this?
We are seeing a jurisdiction-by-jurisdiction approach being adopted by most of our clients, who are looking to raise capital from (non-retail) EU investors. This means that most are deciding not to use an EU tied agent model because the major investor jurisdictions do not require it, and in consideration of the associated regulatory risk attached. There are some, but limited, use of the model where UK individuals are being seconded to the EU AIFM. This above position has evolved significantly over the last 12 months.
More recently, the ESMA notice on reverse solicitation (warning that firms should not use it to circumvent the legislation) in the field of MiFID Investment Services should be taken as a broader warning that 2021 is not the time, given the regulatory focus, to try and play fast and loose with the rules and avoid obtaining any necessary local licences.
What about the new European marketing rules?
The Cross-border Distribution Directive ("CBDD") and Cross-border Distribution Regulation ("CBDR") amend the AIFMD and introduce new rules relating to the marketing of Alternative Investment Funds ("AIFs") in the EU.
One of the benefits of the new rules was to codify what is considered "pre-marketing" i.e. what can be undertaken prior to obtaining an marketing passport/registration for that jurisdiction. This is not a free lunch, if there is subsequent "marketing" i.e. an offer of placement of the fund to those investors that were engaged during "pre-marketing" within 18 months of that taking place then this triggers a notification to the local competent authority.
The rules as written do not apply to non-EU structures and not all major investor jurisdictions in the EU have yet completed their implementation. However, on a positive note, we are starting to see some wider application of these principles to non-EU structures on a jurisdiction-by-jurisdiction basis where they have gone over and above the EU level rules.
In conclusion, there are local jurisdictional hurdles to jump over but they are not insurmountable.
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