New regulatory guidance from the AMF

The Autorité des marchés financiers updated in July 2016 its guide to UCITS and AIF marketing regimes in France, to provide additional guidance on various situations which should not trigger the application of marketing rules in France.

What you need to know

• The AMF published a guide which is designed to detail the conditions applicable to the marketing of funds in France.
• This guide has been recently updated to introduce the concept of “pre-marketing” which should not be considered as an act of marketing.

• Further clarification has also been provided by the AMF on various other cases which would not constitute marketing in France.

Background

In June 2014, the French Autorité des marchés financiers (“AMF”) published the first version of a guide designed to detail the conditions applicable to the marketing of collective investment schemes qualifying as an undertaking for collective investment in transferable securities (UCITS) or alternative investment fund (AIF) within the meaning of Directive 2011/61/EU on alternative investment fund managers (AIFMD).

What does “marketing” mean?

AIFMD defines marketing as a “direct or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF it manages to or with investors domiciled or with a registered office in the Union”. In its guide, the AMF expresses the view that an “offering” or “placement” of units or shares of an AIF should include the presentation of such products by different means (e.g. advertising, solicitation, advice) with a view to encouraging an investor to subscribe to or purchase them, and that this definition of marketing should equally apply to funds qualifying as a UCITS .

The guide also provides guidance on circumstances which do not amount to marketing of funds in France, and therefore do not trigger the application of marketing rules.

The first version of the guide provided that the purchase, sale or subscription of units or shares of a UCITS or AIF in response to a client’s unsolicited request to invest in a specifically designated UCITS or AIF (the so-called “reverse enquiry” exemption) should not constitute marketing. In the same way, the guide also provided that the purchase, sale or subscription of units or shares of a UCITS or AIF by an asset manager acting under the terms of a portfolio management agreement or as manager of an investment fund should not constitute marketing either.

As part of its ongoing work to improve the distribution of French investment funds abroad and to make it easier to launch new investment funds in France, the AMF published a revised version of its guide on 4 July 2016, which extends the scope of the situations which would not constitute marketing of a UCITS or AIF in France.

Introduction of the pre-marketing concept

The AMF recognised that in practice, prior to the launch of an investment fund, professionals may need to communicate with potential investors in order to gauge their appetite for a product, and that considering such communications as marketing which would trigger the application of marketing rules at this stage of the development of a product was not appropriate.

Accordingly, the AMF introduced the concept of pre-marketing, which does not trigger the application of marketing rules in France.

Management companies or third parties acting on their behalf will consequently be able to contact up to a commaximum of 50 investors to assess their interest prior to the launch of a UCITS or AIF without being considered as marketing such UCITS or AIF, provided that (i) investors are professional investors or non-professional investors whose initial subscription amount would be at least EUR 100,000 and that (ii) investors are not given a subscription form and/or documentation containing definitive information on the fund’s characteristics which would enable them to subscribe or undertake to subscribe for units or shares of the relevant fund. However, the guide provides that any subsequent investment in the relevant fund by such investors should not be considered as being made in response to a client’s unsolicited request within the meaning of the “reverse enquiry” exemption mentioned above, and could therefore constitute marketing in France.

The introduction of such a pre-marketing concept in France might be welcomed, but it is uncertain whether this will fully satisfy certain third countries’ fund managers which would like to rely on a broader concept of “pre-marketing”.

Other situations which do not constitute marketing

The AMF further clarified other situations that would not trigger the application of marketing rules in France. These situations include:

• the purchase, sale or subscription of (A) units or shares of a UCITS or AIF in the context of a management company’s compensation policy or by or on behalf of the management company’s management team, its senior management or the management company itself, or (B) carried interest shares;
• OTC secondary trades between investors, when these trades are not organised by the management company or a third party;
• the participation by a management company in conferences or the organisation of meetings with investors giving them information on market trends and developments and on the activities of the management company, provided that (i) these conferences and meetings are reserved for professional investors and (ii) the investors are not asked to invest in a specific product and there is no communication on a UCITS or AIF whose units or shares may be subscribed by investors; and
• a management company responding to a request for proposal from a professional investor which is a legal entity and wants to set up a fund.