Date Published 03/03/2022
ESMA Focus on Reverse Solicitation
In early January 2022 ESMA released a copy of a letter dated 17th December 2021 (the “Letter”) which it had sent to the European Commission in relation to their request for information relating to the practice of reverse solicitation. The Letter notes the difficulty in obtaining relevant information on the prevalence of this practice, highlights some statistics it was able to obtain in specific markets and proposes a new reporting obligation in this regard. The Letter notes the belief among national regulators that the practice may be used to circumvent marketing requirements, among other concerns, indicating that a crack-down on the practice may be pending.
The EU has recently seen the adoption of the new Cross Border Distribution Framework (“CBDF”), comprising EU Directive 2019/1160 and Regulation 2019/1156, in 2021 (see our related Legal Updates for further information). This revised regime is aimed at ensuring greater harmonisation and efficiency for cross border distribution matters. It also addresses the concept of “pre-marketing”, another potential loophole in the AIFMD, since marketing of a fund which has not yet been created, for example, falls outside the scope of this legislation. Under the related revised rules of the CBDF any subscriptions made within 18 months of the commencement of pre-marketing of such an AIF mean that the fund is subject to the registration requirements and accordingly the reverse solicitation “exemption” will not apply during this period. However, the new pre-marketing regime only applies to EU-AIFMs so non-EU AIFMs are not subject to this.
Separately, a draft proposal to update the AIFMD has been released, which includes provisions relating to the ability of third country AIFs to avail of national private placement regimes (“NPPRs”), with a restriction on this being a likely change in the modified AIFMD.
With the reform of the NPPRs already proposed and a renewed focus on the practice of reverse solicitation, it seems inevitable that steps will be taken to curtail this. One of the formal routes to market is accordingly even more appropriate.