In practice, most often that plan first gauges potential investor interest, and the way to do this will change in many Members States which have until 2 August 2021 to implement the new pre-marketing directive (EU) 2019/1160 of the European Parliament and of the Council relating to cross-border distribution of collective investment undertakings (the “PMD”). The PMD amends Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers, and its goal is to harmonize national rules and divergent interpretations on pre-marketing practices.
Now is the time for sponsors to revisit their pre-marketing materials. Based on the PMD, during pre-marketing, EU-based managers should be very careful on what they communicate to potential investors and make sure that all documents communicated explicitly provides an appropriate disclaimer that the AIFM does not yet have a marketing passport and that the documents are early drafts. Under no circumstances should any subscription documents (even in draft version) be sent (or made available through a data room) to potential investors during this period. Nobody knows yet how the new rules will apply to third country managers, but everyone expects changes will be made to national private placement rules to ensure that third country managers are in the same or stricter level playing field. However, it should be permissible for the AIFM to give presentations on the fund, including the background, nature and target market, both target country and industry (although it would be sensible to avoid naming specific investee entities), and timelines of the pre-marketed fund.
The PMD also includes a new provision that will require EU-based managers who undertake pre-marketing to notify their home regulatory authorities within two weeks of commencing pre-marketing. When such requirement will be transposed into national laws, the regulatory authority so notified will in turn notify relevant host authorities. In due course, this may lead to a slightly tedious analysis as to whether managers are undertaking pre-marketing before making this notification, but in most cases it should be tolerably clear whether the discussions are about a new fund (requiring notification) or simply about the manager generally (not requiring notification). We currently do not know exactly what this notification is likely to involve, but the PMD suggests that it will be somewhat simpler than the existing passporting regime.
Sponsors may also wish to discuss with their marketeers what plan they have or are implementing to comply with the PMD. Placement agents and other distributors carrying out pre-marketing on behalf of an AIFM must be authorised in the EEA as an investment firm (or a tied agent of an investment firm), credit institution, UCITS management company or AIFM, and the hard deadline for implementation by Member States is 2 August 2021. Some have already started action to that effect by introducing draft legislation (including France and Germany), but no Member State has fully implemented the PMD to this date. Many marketeers outside the EEA have not established a licensed entity in the EU – some currently rely on licensing exemptions under domestic laws (to the extent they available), some have opted to be a tied agent of a licenced firm. Not all marketeers can afford licencing in the EEA. This is a significant change for many marketeers that necessitates careful planning to effect a successful EEA pre-marketing effort, and not all have taken the same approach to tackle the PMD.
Little hope was given to UK-based marketeers with the Joint Declaration on Financial Services Regulatory Cooperation between the European Union and the United Kingdom, which was a mere agreement to agree. However, now that the EU and the UK are getting closer to reaching a co-operation agreement on financial services by 31 March 2021, there is a potential option for UK-based marketeers who previously enjoyed an unlimited access to the EU market under the passport to regain access to the EEA on the basis of equivalent decisions once the separate Memorandum of Understanding establishing a framework for Financial Services Regulatory Cooperation is agreed. If agreed, these marketeers could market on behalf of EU AIFMs relying as non-EU licensed firms authorized to distribute interests or shares in funds.