Date Published 11/07/2022
New Requirements for Marketing European Investment Funds
The new EU cross-border distribution regime comprising Directive 2019/1160 (the “Directive”) and Regulation 2019/1156 (the “Regulation”) (together the “CBDF”) took effect on 2 August 2021. The CBDF introduced a host of changes and in previous updates, we examined both the updated pre-marketing requirements and the requirement to maintain local facilities across Member States. In this update, we analyse the impact of the new marketing disclosure requirements.
Requirements
The new rules introduce harmonised requirements in relation to marketing materials distributed within the EU. These are based upon the principles of fair, clear and not misleading marketing. In most cases such general principles would already have been applicable, but the CBDF also includes certain granular requirements which are addressed below.
Marketing Disclosure
The new rules require marketing materials to:
• be clearly labelled as marketing communications;
• refer the reader to the associated prospectus (and KID) and advise that any decision to invest should not be based solely on the marketing materials of the fund;
• bring the risks and rewards associated with investing in the fund to the reader’s attention;
• not be inconsistent with or contradict the relevant regulatory documentation; and
• outline how a summary of investor rights may be obtained, including information on potential redress mechanisms.
Further Guidance
The provisions of the CBDF are further supplemented by ESMA Guidance issued pursuant to it and contain certain additional detailed requirements. These include, for example:
• a brief description of the fund’s investment policy and the types of assets that the fund has and/or intends to invest in, along with clarification that the investment is for units in a fund, as opposed to an investment in underlying asset(s).
• any anticipated future performance, must clearly state that the projections are estimates only and include related caveats;
• sustainability related information provided should reflect the extent to which the investment strategy includes social, environmental and sustainable objectives; and
• specific additional disclosures will be required depending on whether the fund is actively or passively managed.
Timelines and Next Steps
The deadline by which marketing materials must adhere to the requirements is 27 November 2021.
Fund managers and management companies are advised to familiarise themselves with the new requirements and marketing materials should be reviewed to ensure they are in compliance with the new rules.
It is advisable that any third party authors of any marketing materials (such as distributors) be required to deliver an undertaking confirming that the new rules will be adhered to throughout the drafting process.
Should you wish to obtain advice in relation to any of the issues discussed in this article, please do not hesitate to contact us.