European Union: EU AIFMD - New Rules For Pre-Marketing Funds And Reverse Solicitation

Last Updated: 4 July 2019
Article by Kam Dhillon

The Cross-border Distribution Directive (CBDD) amends the Alternative Investment Fund Managers Directive (AIFMD) and introduces new rules for the pre-marketing of alternative investment funds (AIFs) in the European Union (EU).

The new rules will impact existing practices in relation to pre-marketing activities - the key change being the introduction of a new notification requirement for pre-marketing to professional investors in the EU. This will have implications for reverse solicitation.

Why the new rules?

The new rules aim to harmonise regulatory and supervisory approaches to pre-marketing activities for AIFs managed by EU alternative investment fund manager (AIFMs) within the framework of AIFMD.

At the moment, what does (and does not) constitute 'marketing' under AIFMD varies significantly across the EU, notwithstanding the fact that it is defined as follows: "A direct or indirect offering or placement, at the initiative of (or on behalf of) the fund manager of units or shares of an AIF it manages, to or with investors domiciled, or with a registered office, in the EU."

Why does this matter? Because 'marketing' an AIF in the EU triggers certain compliance obligations, including the need to submit a prescribed form notification to the national competent authority in the EU member state in which one wishes to market. Failure to do so may result in a fine or public censure. In addition, any subscription agreements entered into as a result of unlawful marketing may be unenforceable.

In contrast, reverse solicitation - i.e. where an investment is made, at the initiative of an investor, in an AIF managed or marketed in the EU - does not trigger any notification obligations.

Nor does pre-marketing. This is good for fund managers because it means they can test a market and explore whether there is sufficient investor appetite before proceeding with a particular investment strategy and establishing an AIF, and before obtaining a marketing passport or submitting a marketing notification and incurring the associated costs.

Current rules and practice in the UK

The UK regulator, the Financial Conduct Authority (FCA), takes the view that communications relating to draft documentation do not constitute 'marketing' under AIFMD. Instead, such promotional activities are subject to compliance with the financial promotion regime under the Financial Services and Markets Act 2000 (FSMA).

'Marketing' under AIFMD is deemed to take place when units or shares in an AIF are available for purchase and final form contractual documents are provided to prospective investors.  

However the FCA recognises that other EU member states may take a different view (as has been the case).

Current rules and practice in the EU

There is no guidance from the European Commission or the European Securities and Markets Authority on the meaning of marketing pursuant to AIFMD, nor is there any consistency in terms of approaches relating to marketing (or reverse solicitation) in member states.

Similarly for pre-marketing, while some member states permit it, the way in which pre-marketing is defined, and the conditions attached to it, tends to vary. In other member states, there is simply no concept of pre-marketing.

The CBDD aims to address this divergence.

What is 'pre-marketing'?

'Pre-marketing' is defined in the CBDD as follows:

"The provision of information or communication, direct or indirect, on investment strategies or investment ideas, by an EU AIFM or on its behalf, to potential professional investors domiciled, or with a registered office, in the EU, in order to test their interest:

  • in an AIF (or a compartment) which is not yet established; or
  • in an AIF (or a compartment) which is established but not yet notified for marketing under articles 31 or 32 of AIFMD;

in the member state where the potential investors are domiciled or have their registered office, and which does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF (or compartment)."

Which AIFMs are in scope?

The pre-marketing rules apply to authorised EU AIFMs only. In the UK this would capture full scope UK AIFMs and small authorised UK AIFMs.

The Cross-border Distribution Regulation, however, extends the pre-marketing regime to managers of qualifying venture capital funds (EuVECAs) and qualifying social entrepreneurship funds (EuSEFs).  

Other small registered AIFMs in the UK - such as internally managed, closed-ended investment companies and external managers of certain property funds - are not in scope of the pre-marketing rules under the CBDD.

What about non-EU AIFMs?

The pre-marketing rules do not apply to non-EU AIFMs (such as Canadian or US fund managers) marketing their funds in the EU under the national private placement regime (NPPR).

It will be up to the national competent authority in each EU member state to determine whether to extend the pre-marketing rules to non-EU AIFMs under the NPPR.

Conditions for pre-marketing in the EU

EU AIFMs may engage in pre-marketing, provided that the information presented to potential professional investors:

  • is insufficient to allow investors to commit to acquiring units or shares of a particular AIF;
  • does not amount to a subscription form or similar document (whether in draft or final form); and
  • does not amount to a final form constitutional document, prospectus or offering document for an established AIF.

Pre-marketing with draft documents

EU AIFMs may, as part of their pre-marketing, provide potential professional investors with a draft prospectus or draft offering documents, but the documents must not contain information sufficient to allow investors to take an investment decision.

The draft prospectus or draft offering documents must clearly state:

  • the document does not constitute an offer or an invitation to subscribe to units or shares in the AIF; and
  • the information presented in the documents should not be relied upon because it is incomplete and may be subject to change.

Record keeping

EU AIFMs must ensure their pre-marketing activities are adequately documented.

New notification requirement for pre-marketing

Within two weeks of starting to pre-market, an EU AIFM must send an informal letter or email to its home regulator with the following information:

  • the member states it is (or has) engaged in pre-marketing;
  • the time periods in which the pre-marketing is taking (or has taken) place;
  • a description of the pre-marketing activities (including a description of the investment strategies presented); and
  • a list of the AIFs and compartments of AIFs that are (or were) the subject of pre-marketing.

The home regulator will then inform the national competent authority in each member state in which pre-marketing is taking, or has taken, place.

This notification requirement is new and represents a key change for UK AIFMs, who typically undertake promotional activities under FSMA (without notifying the FCA) before they start 'marketing' under AIFMD.

What does this mean for reverse solicitation?

Currently, AIFMD does not restrict professional investors who wish to invest in AIFs on their own initiative. Confirmation from the investor that the offering or placement of units of shares of the AIF was made at its initiative is normally sufficient to demonstrate reverse solicitation. On a more practical level, it means the AIFM does not need to submit a marketing notification to the regulator.

Once the new pre-marketing rules come into force, any subscription by professional investors, within 18 months of an EU AIFM having begun pre-marketing, to units or shares of an AIF referred to in the information provided in the context of pre-marketing, or established as a result of the pre-marketing, is considered to be the result of marketing.

This means EU AIFMs will be required to submit a marketing notification to the relevant regulator following pre-marketing.

It effectively means there will be an 18 month moratorium on reverse solicitation, though it is not clear whether this restriction applies to investors or to each EU member state subject to pre-marketing. Either way, it appears as though it will become more difficult to rely on reverse solicitation.

Who can engage in pre-marketing on behalf of an EU AIFM?

The following third parties may engage in pre-marketing activities on behalf of an EU AIFM:

  • an investment firm or a tied agent (in accordance with the Markets in Financial Instruments Directive II);
  • a credit institution (in accordance with the Capital Requirements Directive);
  • a UCITS management company (in accordance with the UCITS Directive); or
  • an AIFM (in accordance with the CBDD).

When do the new rules apply?

The new pre-marketing rules are expected to apply from mid to late 2021.

The European Parliament adopted the CBDD in April 2019, and the European Council followed shortly after in June 2019. The legislation will be published in the Official Journal of the EU (expected in Q3 2019) and will enter into force 20 days after publication. Member states then have two years in which to transpose the pre-marketing rules into national law.

Notwithstanding Brexit, the UK is likely to adopt the CBDD into UK financial services laws. The Financial Services (Implementation of Legislation) Bill 2017-2019 provides a mechanism for HM Treasury to implement EU financial services legislation that is currently in the pipeline for a period of two years after the UK leaves the EU, and this includes the CBDD.

Next steps

Funds looking to raise capital from professional investors in the EU from 2021 onwards must factor these new rules into their fundraising schedule.

If you are affected by any of the above, we can advise you on the changes you will need to make to ensure you comply with the new rules.

Read the original article on

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
7 Nov 2019, Seminar, Birmingham, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

14 Nov 2019, Seminar, London, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

Similar Articles
Relevancy Powered by MondaqAI
Kirkland & Ellis International LLP
Morrison & Foerster LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Kirkland & Ellis International LLP
Morrison & Foerster LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions