CBBD implemented in Dutch law
The Netherlands has published the implementation decree in respect of the EU Directive and EU Regulation on cross-border distribution of funds. This means that the (pre)marketing of units in investment funds will be subject to new rules from 6 November 2021.
Decree implementing the Cross-Border Distribution Directive published in the Dutch Government Gazette
On 5 November 2021, the Decree in respect of the implementation of the Cross-Border Distribution Directive (Besluit tot vaststelling van het tijdstip van inwerkingtreding van de Wet implementatie richtlijn grensoverschrijdende distributie van beleggingsinstellingen en icbe’s) was published in the Dutch Government Gazette (Staatscourant).
The Decree implements the Cross-border Distribution of Funds Framework (the “CBDF Framework”) in the Netherlands and apply as per 6 November 2021.
The CBDF Framework is composed of two main legislative instruments:
(1) a Directive (Directive (EU) 2019/1160 (the “CBDD”)), and
(2) the Cross Border Distribution Regulation ((EU) 2019/1156 (the “Regulation”)).
The Regulation and Directive are supplemented by a Commission Delegated Regulation and specific guidelines issued by the European Securities and Markets Authority (“ESMA”).
Whilst the Regulation is directly applicable in all EU Member States and fund managers already have to ensure compliance with the requirements set out in the Regulation, the provisions of the CBDD had to be transposed into the national laws of all EU Member States. The Netherlands did not timely implement the CBDF Framework, as both the CBDD and Regulation apply from 2 August 2021.
The scope of the CBDF Framework targets the following types of fund managers active in the EU:
a. Alternative Investment Fund Managers (“AIFMs”);
b. Management Companies of Undertakings for the Collective Investment in Transferable Securities (“UCITS ManCos”);
c. Managers of European Venture Capital Funds (“EuVECA”); and
d. European Social Entrepreneurship Funds (“EuSEF”).
In the explanatory notes to the Decree, the Dutch legislator has confirmed that the requirements also apply to non-EU AIFMs notified under the National Private Placement Regime (Article 42 AIFMD (as implemented in Article 1:13b of the Dutch Financial Supervision Act).
2. General Principles
The Regulation and CBDD contain specific requirements that must be complied with by fund managers when drafting pre-marketing and marketing communications for funds.
The CBDF Framework also introduces ‘pre-marketing’ as an EU harmonised concept, and drawing a clear line between pre-marketing and marketing of funds.
The CBDD defines “pre-marketing” as ‘the provision of information or communication on investment strategies or investment ideas, by an AIFM or its delegate performing pre-marketing activities on its behalf, to prospective professional investors domiciled or with their registered office in the EU, to test their interest in an EU AIF which is not yet established or not yet notified for marketing under the AIFMD marketing passport in the EU member state of the prospective investor.’
The CBDF Framework enables AIFMs to provide fund documentation to prospective investors in the EU without having to register for marketing under the AIFMD, provided that the documentation cannot be used to subscribe or commit to the relevant AIF.
In practice, this means that AIFMs can provide materials such as pitch books and term sheets in order to gauge demand before pursuing a full marketing registration. Consistent with current practice, AIFMs will need to register for marketing in order to provide subscription forms, or final constitutional or offering documents in respect of the AIF.
Managers falling within the scope of the CBDF Framework are required to follow a notification procedure in order notify their competent regulator of their intention to pre-market in the EU. This notification procedure must be completed within two weeks of pre-marketing having commenced.
In the Netherlands, the AFM is the competent authority for the pre-marketing notifications.
Under the CBDF Framework, a subscription by a professional investor within 18 months of the AIFM having commenced pre-marketing, to units or shares of an AIF referred to in the information provided in the pre-marketing communication, is to be considered the result of marketing, and is subject following the required marketing notification procedures.
4. Discontinuation of Marketing
The CBDF Framework also prescribes a procedure for de-notifying a fund for marketing in a particular Member State.
For a period of 36 months following de-notification of an AIF, the AIFM should not engage in pre-marketing of units in the AIF referred to in the de-notification, or in respect of similar investment strategies or investment ideas in the Member State identified in the de-notification.
Effective as per 6 November, AIFMS engaging in pre-marketing activities in the Netherlands will need to make sure that they have submitted the pre-marketing notification form to their competent regulator prior to engaging in pre-marketing activities.