This briefing is part of a series of briefings, seminars and topics of interest for those involved in indirect investment, including property funds and the funds sector generally. This particular issue will be of interest to those involved in marketing property funds in the UK and Europe.
As a fund manager in the UK one of the most important regulatory matters you have to consider is whether your marketing is fair and complies with relevant laws. Your reputation is on the line and if you get it wrong it will be a criminal offence.
To avoid liability, and the consequences of FSA penalties, you need to think carefully about these issues. All marketing of whatever sort is caught - verbal or written. As a basic starting point, you should ensure that your marketing is fair, clear and not misleading. When you market a fund, you will also always be subject to the rules contained in the Financial Promotion Orders. There are two Orders; which one applies depends on whether you are FSA authorised. Generally, the impact is the same. These rules require your marketing to be either:
- approved by an authorised person; or
- made only to exempt persons.
Exempt persons include investment professionals, sophisticated investors and high net worth companies who typically need less protection than an ordinary member of the public. A full list of exempt persons is in the Financial Promotions Orders. How these exemptions apply may depend on whether the marketing is real-time or non-real time (for example, a conversation or a brochure); solicited or unsolicited (i.e. whether the client has requested the contact); and "directed" or "made" (i.e. whether your marketing is to an unknown group of people or to specific individuals). You cannot market a fund that is a collective investment scheme to non-exempt persons even if you are authorised or have the document approved by an authorised person.
If you are authorised then you also need to consider if you are subject to the marketing rules in the Markets in Financial Instruments Directive (MiFID). Those rules are in Chapter 4 of the FSA Conduct of Business Sourcebook (COBS). You will be subject to those rules if you are doing MiFID business and you are marketing to a client.
As an authorised fund manager you will usually always be doing MiFID business, however the investors you are marketing to will not normally be regarded as clients under the FSA rules. As long as when you issue your marketing material, you issue required wording to these investors warning them they are not clients, you can market to them without following the rules in Chapter 4 of COBS.
A significant benefit of being an authorised fund manager is that, if you obtain the MiFID passport to do MiFID business throughout EEA countries, you will usually also be able to market your fund and the activities you do throughout Europe.