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EC Legislative Proposals on Cross-Border Distribution of Collective Investment Funds

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.

©2018 Katten Muchin Rosenman LLP

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About this Author

John Ahern, Financial Attorney, London, Katten Law Firm
Partner

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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David A. Brennand, Financial Services Lawyer, Katten Muchin Law Firm
Partner

David Brennand is a partner in the Financial Services practice in Katten Muchin Rosenman UK LLP. David provides advice to a wide range of clients active in asset management on a broad spectrum of matters pertinent to their operations, with a particular focus on advising asset managers on the structuring and ongoing operation of hedge and other alternative fund structures investing in a diverse range of asset classes.

As well as advising on fund structuring and their ongoing operation, David's expertise also extends to advising asset managers and other market participants on fund and management restructurings and on negotiating the structures and terms applicable to managed accounts, seed capital arrangements and illiquid portfolio acquisitions and divestments.

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws...

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
Partner

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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