Pre-Marketing Period under AIFMD: Compliance With the 18-Month Rule
In a significant development for the European investment landscape, the Economic and Monetary Affairs Committee (ECON) of the European Parliament approved a draft report on AIFMD pre-marketing on December 4th, 2018. This draft report aims to streamline pre-marketing conditions and introduce more structure and regulation around it.
The proposed changes to the AIFMD pre-marketing rules, which took effect from August 2, 2021, after agreement in trilogue negotiations in 2019, aim to harmonize pre-marketing activities by alternative investment fund managers (AIFMs) across the EU. The objective is to clarify and regulate the conditions under which pre-marketing of alternative investment funds can be conducted, allowing AIFMs to engage in pre-marketing without triggering full marketing authorization procedures prematurely.
The new proposed '18 months rule' is expected to develop a new practice surrounding pre-marketing activities. This rule allows investors to acquire units or shares in AIFs within 18 months of being approached by managers using AIFMD pre-marketing. The goal is to simplify pre-marketing conditions and prevent it from being used for reverse solicitation.
Under the new regulations, AIFMs should provide information about their pre-marketing activities upon request to their competent authorities after the initial approach. A notification process for pre-marketing activities, involving both home state authorities and host state authorities, has been proposed.
The changes are part of the EU's overall strategy to streamline fund marketing and create a more integrated asset management market in Europe. The directive’s provisions concerning pre-marketing took effect from August 2, 2021. However, it is uncertain if the '18 months rule' will effectively tackle the issue surrounding reverse solicitation and circumvention of the provisions of AIFMD.
It is rumoured that the material and information used for pre-marketing activities will have to be notified in advance to both the home state authority of the AIFM and the host state authorities of the domiciles where any such AIFMD pre-marketing activities are carried out. The draft report also aims to ensure pre-marketing is possible while preventing it from being used for reverse solicitation.
The AIFMD, enacted in 2011, has made marketing of AIFs less casual, with focus now on pre-marketing activities. The new regulations are expected to further clarify and regulate these activities within a clear regulatory framework harmonized across member states to support the cross-border marketing of AIFs.
This article is a guest article for Hedge Funds, published by The Sortino Group. Reproduction, storage, or transmission of the publication is allowed only under certain conditions or with written permission from the publisher. The views expressed in the article are the author's own and do not reflect the views of AlphaWeek or The Sortino Group.
Attilio Veneziano, Managing Partner at Veneziano & Partners, offers insights into the implications of these changes for the alternative investment industry. As the industry continues to evolve, it is crucial to stay informed about regulatory developments that shape the investment landscape.
- The changes in AIFMD pre-marketing rules, which became effective on August 2, 2021, after a series of negotiations and approvals in 2019, are significant for the business world and politics, as they aim to regulate and harmonize pre-marketing activities by alternative investment fund managers (AIFMs) across the EU.
- The new '18 months rule' in the EU's strategy to streamline fund marketing is expected to impact general news and policy-and-legislation discussions, as it allows investors to acquire units or shares in AIFs within 18 months of being approached by managers using AIFMD pre-marketing, simplifying pre-marketing conditions and preventing reverse solicitation.
