AIFMD Webinar - CounselWorks

AIFMD for
NON-EU Asset Managers
October 28, 2014
Marketing Passport Overview
•
Currently, US managers and US funds may not apply for a marketing passport in
the EU. US managers are only able to market on a country by country basis under
the National Private Placement Regime of each country.
•
This landscape is wide and varied, with certain jurisdictions such as Germany,
France and Denmark implementing stringent additional requirements, such as
locally based depositaries.
•
Of the major EU countries, US managers are not able to market in Italy.
•
It is anticipated that a passport will be available for US managers to market freely
throughout the EU in late 2015.
•
Should this happen, US managers must comply with all aspects of the Directive,
and be authorized (and have a legal representative in) their “Member State of
Reference”, which will usually be the EEA Member State where most marketing is
carried out.
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Current Marketing in the EU for US
Managers
•
The AIFMD defines ‘marketing’ as: A direct or indirect offering or placement at the
initiative of the Alternative Investment Fund Manager (AIFM), or on behalf of the AIFM
of units or shares of an AIF it manages to, or with investors domiciled or with a
registered office in the Union
•
Each EU territory has adopted a different definition of what ‘marketing’ is. Many states
have ‘gold plated’ the EU Directive, adding layers of country specific rules, guidance
and practices to the core Directive.
Examples include:
–
United Kingdom: In the UK, the FCA has largely adopted the definition found in the Directive:
–
Switzerland: Switzerland has revised its rules, known as the Collective Investment Schemes Act, to
mirror those set forth in the AIFMD.
–
The Netherlands: In the Netherlands, SEC registered AIFMs may offer AIFs to investors provided a
notification is made to the Dutch regulator and an attestation received from the SEC as part of a
supervisory co-operation agreement.
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Funds-of-Funds and
‘Looking Through’
•
Where an investor acts on its own behalf and subscribes directly to an AIF, that
person or entity is considered the investor.
•
However, in the event that person engages another person to subscribe to the AIF
on its behalf, including, for example, where:
– (a) a nominee company subscribes as bare trustee for an underlying beneficiary; or
– (b) a custodian subscribes on behalf of an underlying investor
•
The AIFM should 'look through' the subscriber to find the underlying investor
making the decision to invest. That person should be regarded as the investor.
•
Fund-of-Funds: Where a discretionary manager subscribes on behalf of an
underlying investor to the AIF, and the discretionary manager makes the decision
without reference to the investor (such as in the case of a fund of funds), it is not
necessary to 'look through' the structure. The discretionary manager should be
considered to be the investor for the purposes of the AIFMD.
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Reverse Solicitation &
Passive Marketing
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•
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What is a ‘reverse solicitation’?
Broadly speaking, a “reverse solicitation” occurs where the investor approaches the AIFM on his/her
own initiative and there is no overt marketing approach from the AIFM.
Because what constitutes “marketing” is determined on a country-by-country basis, what constitutes
“reverse solicitation” will be as well.
United Kingdom: The FCA has provided guidance on what constitutes reverse solicitation in the
UK, stating that:
– a confirmation from the investor that the offering or placement of units of shares of the AIF was
made at [the investor’s] initiative, should normally be sufficient to demonstrate [passive
marketing], provided this is obtained before the offer or placement takes place.
– Crucially, the FCA has stated that this approach is allowed, provided that such confirmations
are not being used as a means of circumventing the requirements of AIFMD. The FCA have
also stated that they will focus their supervisory work on this topic.
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‘Pre-marketing’
•
In the UK, “pre-marketing” is NOT subject to the same restrictions. The FCA’s view on
presentations and draft offering documents is:
– Any communications relating to this draft documentation do not, in our view, fall within
the meaning of an 'offer' or 'placement' for the purposes of AIFMD, as the AIFM cannot
apply for permission to market the AIF at this point. For example, a promotional
presentation or a pathfinder version of the private placement memorandum would not
constitute an offer or placement, provided such documents cannot be used by a potential
investor to make an investment in the AIF.
*Important to note that the above currently applies only to EU AIFMs, we are
currently seeking clarification as to whether this also applies to Non-EU AIFMs.
– It is important to remember that while not marketing, a presentation or draft document
could still constitute a ‘Financial Promotion’ and should comply with the requirements to
ensure materials are ‘clear, fair and not misleading’.
•
This interpretation is UK specific, other territories will have their own interpretation of what
constitutes marketing under AIFMD.
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Current Marketing Registration
Process
• United Kingdom: The UK does not require registration or authorization
but merely a notification.
– It is key to ensure that offering documentation is finalized and includes AIFMD relevant
disclosures.
– Annual reporting to investors is required, as well as periodic reporting to the regulator
about the activities of the AIF.
• The Netherlands: The Netherlands does not require registration or
authorisation but simply a notification.
• Switzerland: Certain ‘qualified investors’ can be marketed to freely; other
classes of qualified investors require arrangements with a locally authorised
representative and a Swiss ‘paying agent’.
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Consequences of NonCompliance
• Suspension of marketing/management activities
• Restriction of marketing/management activities
• Financial penalties
• Investor flight – Possible compensation if agreement
deemed unlawful
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