AIFMD marketing rules lost in translation

Each EU member state has interpreted the marketing requirements of the directive differently, creating barriers to cross-border distribution, Brussels consultation told.

Variations to marketing rules and procedures across European member states are creating barriers to cross-border alternative investment fund distribution, according to industry sources.

One of the most pressing issues is the different definition of marketing from country to country, respondents to a European Commission public consultation on cross-border fund distribution said.

“Some countries define marketing so broadly that no activities that are normally considered pre-marketing are allowed,” the European Association for Investors in Non-Listed Real Estate Vehicles said.

Countries including Spain and Italy do not allow discussions of general fund strategy with investors before a marketing passport is in hand, even though the fund may not have been established, for example. This can make it difficult to do a broad cross-border launch of a fund, the Association of Real Estate Funds said.

The issue has arisen because countries have adopted the Alternative Investment Fund Managers Directive into national laws in different ways; there was no clear definition of what constitutes marketing in the final legislation.

Differences in marketing policies are also impacting cross-border fund distribution.

“Spain requires the appointment of a local agent. Not only is it an additional expense, but the time required to enter into an arrangement with a local Spanish agent can be quite long,” AREF said.

Elsewhere, marketing fees add to the financial burden of cross-border activity, several respondents said. Examples include: Malta, which imposes a fee of €2,500 per fund each year; Austria which charges €1,100 per fund and an annual fee of €600 per fund, with additional fees charged in both cases for each sub-fund; and Croatia, which charges an initial fee of €2,900 per manager as an annual fee of €1,800 per fund.

“In some cases [fees attached to the marketing passport] appear to arbitrary, based on opaque methodologies and/or subject to automatic annual increases unrelated to costs,” AREF said.

Invest Europe, a body which represents the private equity industry, said its members believe that the cost of marketing requirements can constitute a serious limitation to the cross-border distribution of their funds.

“Private equity fund managers are usually subject to complex regulatory requirements, whether arising from the transposition of the AIFMD or from national rules, which do not seem to be justified by the systemic risk profile of the sector,” it said in its response.

Other barriers to cross-border marketing noted by respondents included depository requirements in Germany and Denmark, long lead times to process applications in a number of countries and the need to employ a local lawyer when a manager starts to market in certain member states.