Hold tight, this is going to get technical!

On the 2nd August 2021 the new Cross-Border Distribution of Funds regime (“CBDF”) will come in to force across the EU. For many this will mean little, but it will have a huge impact on all those who are involved in the marketing or distribution of funds across, or into, the EU.

The new rules come under the EU Alternative Investment Fund Managers Directive (“AIFMD”) with the aim of harmonizing the distribution of alternative investment funds and UCITS (“AIFs”) across the EU by Alternative Investment Fund Managers (“AIFM”).

Stay with me here, this is important!

Cutting to the chase, the CBDF is going to impact, amongst other functions:

  • Pre-Marketing;
  • Reverse Solicitation;
  • Marketing De-Registration; and
  • Marketing Communication

Now I have your full attention, let’s get into how the CBDF will be implemented. Firstly, this only applies to EU AIFM’s. Secondly, how these guidelines will be applied to non-EU AIFM’s, if at all, will be determined by each individual member state.  Thirdly, the UK’s FCA will not be adopting this regime, as it is not obliged to post Brexit, therefore no change to UK AIFM’s.  Timing is also important to note, the regime comes into force on the 2nd August 2021 but the member states have six months from this date to write the CBDF in to local law. Therefore, it will not be until early 2022 that the full impact on the non-EU AIFM’s will be understood.

Returning to the impacted functions, Pre-Marketing is without doubt the most significant in terms of capturing new activities. I will not get into the specifics here, but it is important to note that this process was historically out of regulatory scope (other than in France) and is now going to be fully within scope, resulting in additional regulatory monitoring, filing and reporting. This also has a direct knock-on affect to reverse solicitation, which will now no longer be applicable during the 18 months after the filing of the pre-marketing regime, as any client allocating within this timeframe will be required to be treated as if  ‘marketing’ had taken place, thereby requiring appropriate local regulatory oversight, passporting or agency to facilitate the investment in to an AIF post pre-marketing. To reiterate, this is specific to EU AIFM’s, however, there is an expectation that this will also be applied to non-EU AIFM’s – the equivalent mechanisms and oversight have yet to be presented by each member state.

What will come into immediate effect this August is the new rules around marketing communication. There are multiple prescribed changes in terms of how marketing materials are presented, but as importantly, what will constitute a marketing communication. A presentation, one-pager or even an email that may have previously been outside the scope may well now fall into scope. In a similar vein, if you no longer wish to market an AIF, a new de-registration process comes in to force now, meaning that not only must this be reported to the local regulators, but will further exclude that AIF form being marketable for three years thereafter.

I am only touching on the highlights of the CBDF here. All AIFMs, EU or non-EU, must be fully versed in this new regime. If you have not already immersed yourself into this new directive, it is time to do so.




To learn how Quay can guide your business to success…www.quaypartners.com              

Quay Partners Group delivers bespoke investment management solutions to independent hedge fund managers and family offices. Thomas Underwood, the Founder, has over 20 years’ experience in managing and operating hedge funds.

22nd July 2021