The Luxembourg regulator, the Commission de Surveillance du Secteur Financier (CSSF) has provided guidance on the meaning of marketing and reverse solicitation under AIFMD. This guidance is to be welcomed, as there is no European-wide guidance on these topics and there is scope for the position to vary from jurisdiction to jurisdiction. The CSSF guidance is broadly along the same lines as the FCA’s guidance on these topics in PERG 8.37.

The new guidance published on 10 August 2015 in the CSSF’s revised version of its Frequently Asked Questions (version 9) clarifies the scope of the activities which may be carried out in Luxembourg or with investors domiciled in Luxembourg without triggering the need to passport or notify and will solve many practical issues faced by asset managers when considering their fundraising in Luxembourg.

The revised version includes a new section (21) with 16 new questions and answers dealing with the definition of marketing and reverse solicitation. The following points are worth highlighting:

Providing draft documents is not marketing

  • Providing draft documents by an AIFM to prospective investors is not considered a marketing activity if the prospective investor cannot use the documents to formally subscribe or commit to subscribe shares or units of the AIF.
  • The AIFM is permitted to present to prospective investors documents in relation to the AIF it manages prior to informing the CSSF provided that investors may not formally invest or commit in the AIF, and there is no subscription until the CSSF is informed.

Distance marketing qualifies as marketing

  • Distance marketing is an activity which is carried out by any means of communication that does not need simultaneous physical presence in Luxembourg of representatives of i) the AIF, the AIFM, or its intermediary, and ii) the investor. Distance marketing qualifies as marketing in Luxembourg when investors are domiciled or have their registered offices in Luxembourg and the relevant materials can be used to subscribe for shares or units of the AIF.

Clarification of reverse solicitation

  • Reverse solicitation consists in providing information regarding an AIF and making units or shares of that AIF available for purchase to a potential investor following an initiative of that investor (or an agent of that investor) without any solicitation made by the AIF or its AIFM (or an intermediary acting on their behalf) in relation to the relevant AIF.
  • Reverse solicitation is not marketing under the AIFMD if the following elements are met:
    • The investor or agent has approached the AIFM or the AIF on its own initiative, with the intention of investing in (or initially in receiving information regarding) AIF(s) managed by such AIFM;
    • Neither the AIFM, nor the AIF (nor any intermediary acting on their behalf) has solicited the investor to invest in the relevant AIF.
  • The AIFM has the burden of proof with respect to the two criteria above. Evidence can include written confirmation by the investor of its decision to invest on its own initiative or, initially, requesting information regarding the relevant AIF(s).

Activities which do not constitute marketing

The CSSF confirmed that the following activities do not constitute marketing:

  • Investments made in AIFs in the context of a discretionary mandate for the management of individual portfolios (at the initiative of the investment manager) do not have to be considered as marketing of such AIF vis-à-vis the investment manager and its client.
  • A proposal to invest in an AIF in the context of an investment advisory agreement (at the initiative of the advisor) does not have to be considered as marketing of such AIF vis-à-vis the advisor and its client.
  • Investments in targeted AIFs made in the context of collective portfolio management of an AIF (at the initiative of such AIF or of its management company, AIFM, portfolio manager or other agent) do not have to be considered as marketing of such target AIF vis-à-vis the AIF and the portfolio manager.
  • Secondary trading of units or shares of an AIF is not considered marketing unless there is an indirect offering or placement through one or more intermediaries acting at the initiative or on behalf of the AIFM or the AIF.