On the 20th June 2019, the European Parliament and the Council adopted Directive (EU) 2019/1160, the Cross-border Distribution Directive (CBDD), which amends the Alternative Investment Fund Managers Directive (AIMFD Regulation).
The Directive will harmonise the definition of ‘pre-marketing activities’ across the union, in order to eliminate the varying interpretations which are resulting in the imposition of different obligations on Alternative Investment Funds (AIFs) across Member States.
The CBDD defines pre-marketing activities as:
“Provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or with a registered office in the Union in order to test their interest in an AIF or a compartment which:
in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF or compartment”.
The Directive introduces several conditions for pre-marketing in the EU. For example, the information presented to potential investors must not be sufficient to allow investors to commit to acquiring units or shares in an AIF, nor amount to subscription forms, constitutional documents, prospectuses or offering documents in final form.
AIFs may issue draft prospectuses or offering documents for pre-marketing, however these must not contain enough information to allow investors to take investment decisions. Furthermore, they must explicitly state that they do not constitute an offer to subscribe and that the information contained therein is subject to change.
Within two weeks, the AIF must notify the national competent authority, through a letter or e-mail, specifying details about pre-marketing, including:
Currently, subscription to units or shares of an AIF by professional investors within 18 months from pre-marketing is considered to be the result of pre-marketing. The new Directive will maintain this; however, it will also impose the obligation on AIFs to notify the national competent authority following pre-marketing, which essentially prevents reverse solicitation.
Managers seeking to raise capital for funds must bear these new rules in mind, as Member States must transpose the directive by the 2nd August 2021.
Get in touch with us to find out more about how this directive can impact your business!