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Summaries of EU Legislation

Cross-border distribution of collective investment undertakings

 

SUMMARY OF:

Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014

WHAT IS THE AIM OF THE REGULATION?

It sets out uniform rules for national regulation concerning marketing requirements for collective investment undertakings (or ‘investment funds’) and on marketing communications addressed to investors, to improve market efficiency as part of establishing the EU’s capital markets union.

It also sets out a common approach to fees and charges levied on investment fund managers for their cross-border activities and proposes a central database on the cross-border marketing of collective investment undertakings.

KEY POINTS

The regulation applies to:

Marketing communications

  • AIFMs, EuVECA, EuSEF and UCITS managers, as well as UCITS management companies, must ensure that all marketing communications addressed to investors are identifiable as such and describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner. Marketing communications should:
    • be fair, clear and not misleading;
    • indicate that a prospectus exists and that key investor information is available, and specify where, how and in what language investors can obtain the prospectus and key information;
    • specify where, how and in what language investors can obtain a summary of investor rights, which will include, where appropriate, information on access to collective redress mechanisms at EU and national level in the event of litigation;
    • contain clear information indicating that the manager or the management company may decide to stop marketing its investment fund.
  • Competent authorities must keep their websites up to date with complete information on applicable national laws, regulations and administrative rules, including summaries, governing marketing requirements for AIFs and UCITS, in a language customary for international finance.
  • To verify compliance with this regulation and national rules on marketing requirements, competent authorities may require advance notice of marketing communications intended by UCITS management companies to be used directly or indirectly in their dealings with investors.

Fees and charges

  • Common principles regarding fees and charges levied by competent authorities on managers of collective investment undertakings for their cross-border activities must be consistent with the overall costs of the competent authority.
  • By 2 February 2022, The European Securities and Markets Authority (ESMA) will make publicly available on its website an interactive tool that provides an indicative calculation of the fees or charges.

Central database

The regulation also introduces a central database regarding the international marketing of AIFs and UCITS within the EU. ESMA must publish this database on its website by 2 February 2022, in a language customary for international finance.

Pre-marketing*

The regulation introduces rules on pre-marketing EuVECAs and EuSEFs from 2 August 2021, in line with those laid down for alternative investment funds in Directive (EU) 2019/1160. The rules are aimed at allowing managers to target investors by testing their appetite for upcoming investment opportunities or strategies through qualifying venture capital funds and qualifying social entrepreneurship funds.

Reporting

Competent authorities must report to ESMA on marketing communications by 31 March 2021 and every 2 years, outlining the number of requests for amendments of marketing communications, clearly distinguishing the most frequent breaches, and giving examples.

Evaluation

By 2 August 2024, the European Commission through public consultation and discussion with ESMA and competent authorities, will conduct an evaluation of the application of the regulation.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 1 August 2019. Article 4(1) to (5) on marketing information, Article 5(1) and (2) on competent authority websites, and Articles 15 and 16 on amendments to previous legislation concerning pre-marketing of EuVECAs and EuSEFs apply from 2 August 2021.

BACKGROUND

See also:

KEY TERMS

Alternative investment fund (AIF): a collective investment undertaking (investment fund) which raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and not requiring authorisation under Article 5 of the UCITS Directive 2009/65/EC. They include EuVECA, EuSEF and ELTIF*.
Alternative investment fund manager (AIFM): legal person whose regular business is managing one or more AIFs.
Undertaking for collective investment in transferable securities (UCITS): an undertaking for collective investment (or ‘investment fund’) which invests in securities, i.e. in stocks, bonds, stocks and bonds, short-term treasury instruments and cash.
European venture capital fund (EuVECA): a label introduced in Regulation (EU) No 345/2013 which allows managers to set up and market their funds across the EU using a single set of rules.
European social entrepreneurship fund (EuSEF): a label introduced in Regulation (EU) No 346/2013 which is designed to identify funds focusing on European social businesses, making it easier for them to attract investment.
Pre-marketing: providing information or communication on investment strategies or investment ideas by a manager of a qualifying venture capital fund to potential investors in the EU in order to test their interest in a qualifying venture capital fund which is not yet established.
European long-term investment fund (ELTIF): introduced in Regulation (EU) 2015/760 aimed at investment fund managers who want to provide long-term investment to institutional and private investors across Europe. They target specific types of projects which require long-term funding to develop successfully but struggle to get financing.

MAIN DOCUMENT

Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (OJ L 188, 12.7.2019, pp. 55-66)

RELATED DOCUMENTS

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Action plan on Building a Capital Markets Union (COM(2015) 468 final, 30.9.2015)

Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (OJ L 123, 19.5.2015, pp. 98-121)

Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352, 9.12.2014, pp. 1-23)

Successive amendments to Regulation (EU) No 1286/2014 have been incorporated into the original text. This consolidated version is of documentary value only.

Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank: An investment plan for Europe (COM(2014) 903 final, 26.11.2014)

Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds (OJ L 115, 25.4.2013, pp. 18-38)

See consolidated version.

Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (OJ L 115, 25.4.2013, pp. 1-17)

See consolidated version.

Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, pp. 1-73)

See consolidated version.

Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, pp. 84-119)

See consolidated version.

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, pp. 32-96)

See consolidated version.

last update 06.12.2019

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