On March 12, as part of the development of the EU’s Capital Markets Union (CMU), the European Commission (EC) published two legislative proposals in relation to the cross-border distribution of collective investment funds within the EU:

  1. a Regulation (Proposed Regulation) facilitating the above and amending existing Regulations on European venture capital funds and European social entrepreneurship funds; and
  2. a Directive (Proposed Directive) amending the Undertakings for Collective Investment in Transferable Securities (UCITS) IV Directive and the Alternative Investment Fund Managers Directive (AIFMD).

The Proposed Regulation contains harmonized EU requirements in respect of:

  1. marketing communications;
  2. pre-marketing; and
  3. European Securities and Markets Authority (ESMA) central databases for:
    1. all alternative investment fund managers (AIFMs), UCITS management companies, alternative investment funds (AIFs) and UCITS;
    2. all applicable national provisions governing marketing rules for AIFs and UCITS; and
    3. fees and charges levied by competent authorities.

The Proposed Directive would amend the UCITS IV Directive in several ways, including:

  1. banning member states from requiring local facilities in the member states where UCITS are marketed;
  2. aligning the procedure for notification to competent authorities of changes that UCITS are planning in relation to their managed funds with the procedures set out in AIFMD—competent authorities will have 10 working days to notify a manager not to implement a change if it would lead to non-compliance; and
  3. setting out conditions for UCITS who plan to stop marketing activities in a member state.

The Proposed Directive would amend AIFMD in several ways, including:

  1. providing a “pre-marketing” definition—pre-marketing is not “marketing” as long as the information provided does not:
    1. relate to or contain reference to an established AIF;
    2. enable investors to commit to investing in an AIF; or
    3. amount to draft or final-form documents allowing investors to take an investment decision .This widens “marketing” to include circulation of draft documents, which raises potential issues with regards to obtaining marketing passports;
  2. amending notification procedures for changes to AIFs—similar to the amended UCITS notification procedure, except that competent authorities have 20 working days to notify the AIFM; and
  3. setting out conditions for AIFMs who plan to stop marketing activities in a member state.

The proposals and other related documents are available here.