Finland has recently implemented the EU Directive on the cross-border distribution of collective investment undertakings (2019/1160/EU) (the “Directive”), which further amends the Alternative Investments Funds Managers Directive (“AIFMD”). This implementation required amendments to the Finnish Act on Alternative Investment Fund Managers (“AIFM Act”), and the Finnish Parliament approved these amendments last week. The amended AIFM Act gives rise to significant changes in the pre-marketing activities carried out by alternative investment funds (“AIFs”).
These new provisions apply to both licensed and registered alternative investment fund managers (“AIFMs”) and to AIFMs established in third countries. The new rules enter into force on 1 December 2021.
Definition of pre-marketing
Until now, only “marketing” has been regulated in the AIFMD and the AIFM Act. However, AIFMs who have sought to test investors’ interest in a particular investment idea or strategy have been treated differently in different Member States with regard to their pre-marketing activities. The Directive seeks to harmonise these differences through the introduction of a definition of “pre-marketing”.
The Directive defines pre-marketing as a direct or indirect provision of information on investment strategies or investment ideas supplied by an EU AIFM or on its behalf to professional investors domiciled or registered in the EU in order to test their interest in an AIF that is not yet established, or that is established, but not yet notified for marketing in accordance with the AIFMD.
The Finnish Governmental Bill relating to the changes, however, indicates that there needs to be a connection to a specific fund, and that where an AIFM is just presenting its expertise without a link to the strategy or idea of an AIF, this would not constitute pre-marketing. It also notes that “pre-marketing” should not be deemed to cover a situation where, as a result of an initial contact by an investor, the AIFM presents different investment options.
The new rules regarding pre-marketing would be applied both to authorised and registered AIFMs, and the Finnish implementation extends the rules on pre-marketing also to non-EEA AIFMs.
Pre-marketing would be allowed not only to professional clients but also to non-professional clients in Finland. It should be noted, however, that there are pre-existing restrictions with respect to marketing to non-professional clients and these restrictions continue to apply.
Free-form notification required
A domestic AIFM is required to provide the Finnish Financial Supervisory Authority (“FIN-FSA”) with a free-form notification within two weeks from the commencement of pre-marketing activities. Such notification must include information on
- the EEA countries in which the pre-marketing takes place,
- the time period of pre-marketing,
- a short description of premarketing, including the relevant investment strategies, and
- a list of the relevant AIFs.
Also ”sub-threshold” EEA AIFMs and non-EEA AIFMs may pre-market AIFs in Finland, but they are subject to a requirement to make a corresponding notification to the FIN-FSA.
The new rules specify what documentation and information may be provided to investors in the pre-marketing phase Such information must not be sufficient to allow investors to commit to make an investment, and must not contain 1) subscription forms or similar documents, offering documents of a not-yet-established AIF in their final form, or 2) constitutional documents, prospectuses or offering documents of a not-yet-established AIF in their final form.
In addition, the documentation must clearly state that: (a) it does not constitute an offer or an invitation to subscribe to units or shares of an AIF; and (b) the information presented therein should not be relied upon because it is incomplete and may be subject to change.
Subscriptions deemed to be a result of marketing
Any subscription made within 18 months of the AIFM having commenced pre-marketing activities, will be considered to be a result of marketing, and accordingly, such subscription will be subject to the requirements set out in the AIFM Act in terms of marketing an AIF. The Governmental Bill that proposed the changes states that the rule will apply regardless of whether the relevant investor has been targeted by the pre-marketing. On the other hand, the wording refers to a fund meant in (or established as a result of) the pre-marketing.
The amendments come with explicit rules on the de-notification of AIFs, which on the other hand entails a 36-month’s suspension period during which the AIFM may not pre-market “similar investment strategies or investment ideas” in the relevant Member State(s). The rules on de-notification will be applied also to non-EEA AIFMs marketing AIFs in Finland.
In addition to above, the changes to the AIFM Act
- require an AIFM to keep adequate records of its pre-marketing activities,
- restrict the right of an AIFM to engage third parties to carry out pre-marketing of an AIF,
- require AIFMs to make available “arrangements”, e.g. to arrange the provision of information to investors and act as a contact point for communicating with the competent authorities, when marketing to non-professional investors.
The European Securities and Markets Authority has issued guidelines on marketing communications under the regulation on cross-border distribution of funds, which specifies the application of the requirements for marketing communications set out in the regulation. The guidelines include specifications, for example, on
- the identification as such of marketing communications,
- the need to include a disclaimer in marketing communications,
- the description of risks and rewards in an equally prominent manner,
- the fair, clear and not misleading character of marketing communications.
Entry into force
The amendments to the AIFM Act will enter into force on 1 December 2021. The FIN-FSA recommends that ESMA’s guidelines are applied as of 2 February 2022.
The new pre-marketing rules require AIFMs to reassess their marketing approach considering the above-mentioned amendments and ensure that they are compliant by filing necessary pre-marketing notifications to the FIN-FSA as of 1 December 2021, if the AIFM distributes information which is regarded as pre-marketing.
Borenius’ lawyers are available to assist in addressing any questions you may have regarding this alert. Please feel free to contact any of the Borenius’ attorneys listed in this alert or those with whom you usually work.