What if co-operation arrangements are not in place in time?
We expect that most will be. However, without a co-operation arrangement in place between all relevant regulatory authorities, the manager will need to:
Rely on marketing transitional periods to the extent that these are available.
Rely on reverse solicitation marketing.
Rely on soft-marketing, brand marketing etc. to the extent permitted (although there may be a problem “closing” sales if this is the only option).
Restrict marketing to non-AIF vehicles e.g. managed accounts, UCITS.
How do I track the position in different EEA member states?
Dechert has a dedicated team of lawyers focused solely on monitoring fund marketing rules. Talk to your regular Dechert contact or any member of our AIFMD team about how we can help, including our World Compass – Global Blue Sky™ service.
Can’t I just use my EEA subsidiary to handle my European marketing?
This doesn’t avoid the private placement restrictions or the need to register private placement for non-EEA funds. Once so registered, an EEA manager (which, if an AIFM, might need “extended permissions”) could however be involved in the marketing and in closing investors into the fund. If the EEA subsidiary is involved in the management of the fund, this could actually increase compliance requirements considerably.
Investment advisers seeking to use marketing intermediaries in Europe after July 22 can be held liable for the acts of an intermediary as if marketing directly and should therefore obtain appropriate comfort as to AIFMD compliance.
Does AIFMD restrict my communications with existing investors?
As a general matter, providing existing investors with information about existing funds in which they are invested (NAV statements, annual reports etc.) is unlikely to be marketing. Where PPM updates are provided (for informational or approval purposes) it would be prudent not to send subscription documentation (and it follows that where application forms have been integrated into PPMs these should be removed).
There is unlikely to be a reason under AIFMD why US managers should refuse any EEA investor seeking at its own initiative to increase its allocation to a fund. A pre-existing relationship between the fund and investor may be helpful in establishing that such approaches are at the initiative of the investor.
Anything communicated with a view to persuading investors to increase their allocation to an existing fund or invest in a new product warrants careful consideration. Although it may well fall short of marketing, this is technically a case by case analysis in each relevant jurisdiction. Our World Compass – Global Blue Sky™ service considers common scenarios in this regard.
What about existing discussions with prospective investors?
Those currently engaged in marketing funds to European prospects will need to determine whether any steps need to be taken before 22 July in order to safeguard the investment adviser’s ability to (i) continue discussions with prospective investors; or (ii) market new products to existing investors. The fact that dialogue with an investor is in process prior to July 22 does not avoid the need to ensure that follow-up marketing (including that investor’s eventual subscription) follows one of the permitted routes to market, just like it would need to if the ‘first contact’ took place after 22 July. As noted above, a pre-existing relationship with the investor may be helpful in establishing that such approaches are at the initiative of the investor. There may well also be documentary steps that can be taken (for example, to re-enforce a reverse solicitation) but sponsors should beware “one size fits all” apparent solutions which may end up causing more harm than good.
What happens in 2015?
In due course it is envisaged that US managers may be able to apply for full authorisation under the AIFMD, and enjoy a pan-EEA marketing passport on equal terms with EEA managers. The AIFMD lays out a broad compliance framework and road map to permit this to happen. It is also envisaged that in 2018 or thereafter, such registration may be the only route to market in Europe, and any remaining national private placement regimes may be “switched off”. Whether or not any of this actually happens, remains to be seen. For managers interested in forward planning, more information is available from our AIFMD resources or your usual Dechert contact.