The ever-changing regulatory landscape continues to bring new challenges for asset managers. In this article we focus on the Cross Border Distribution Framework (CBDF) coming fully into effect by early 2022. Among other things, this new regulation and directive is intended to increase the transparency and harmonization of cross-border marketing activities both between the AIFMD and UCITS regimes and across member states.
There are two key dates attached to the CBDF, one being 2 August 2021, when regulation on pre-marketing, the removal of local agents and requirements on information required in marketing materials came into effect. The other key date is 2 February 2022, when the ESMA Communications Guidelines (the Guidelines) come into force. Application of the Guidelines is perhaps the more challenging element of the CBDF as they are not prescriptive yet cover both traditional and digital communications. Fund managers therefore need to prepare for the compliance challenges inherent in managing communications in an already complex regulatory landscape.
Local expertise, with a global outlook
How fund managers carry out marketing will be affected by the new set of European rulings, from disclaimers and advertising to emails and social media. Although the Guidelines are EEA-specific, the changes in relation to expansion of disclaimers and clarity in noting marketing communications as such will be relatively familiar to global clients coming into Europe. What may not be so familiar are the nuances that need to be considered to remain in compliance with the Guidelines, and the CBDF more generally. One item to be aware of is the reach of any marketing communication intended for EEA investors. The communication should not be accessible in a member state in which the UCITS or AIF is not passported and, thus, jurisdictional controls of the media a client uses need to be looked at as part of the communication planning.
Communication is the key to engaging investors’ interest and complying with the communication rules ensures investors’ interests are managed within the appropriate regulatory framework. It simply can't be avoided. Clear and compliant messaging is what makes a successful communication campaign to gain new investors.
A time-sensitive task
The Guidelines take effect in the first quarter of 2022. Therefore, if you have not already done so, now is the time to review communications and marketing materials to:
- Identify any disparities between these and the provisions of article 4 of the CBDF
- Put processes in place for ongoing logging and monitoring of communications
Waystone, as a UCITS Manager, AIFM, and a distribution partner to our clients, is monitoring the application of the new rules to support its global client base in meeting the Guidelines on schedule.
Increasing confidence in distribution
Clearly, this harmonization of pre-marketing for AIFs is an improvement against the more fragmented approach that used to prevail, but ESMA guidelines highlight convergences by immediately applying equally to AIFs and UCITs. The member state can apply a guideline in differing ways, for example by demanding the translation of certain types to marketing materials and it is still unknown how each country will react to the guidelines. This brings uncertainty to the whole experience and Waystone is monitoring closely what the next step will be in 2022. Bringing confidence and certainty to clients is what Waystone provides, so they can always be on the right side of compliance.
Waystone continues to monitor changes across the EU to be sure it can best assist its clients to navigate this ever-changing regulatory landscape and remain compliant.