The introduction of the Fondsstandortgesetz ("FoG") is intended to strengthen Germany as an investment fund location and to adapt German law to European requirements. Whereas previously only the distribution of shares or units of an investment fund was subject to a duty of disclosure, the FoG for the first time legally anchors a legal definition of so-called pre-marketing in the German Investment Code ("KAGB"). This means that the pre-marketing stage of the public and previously solely regulated distribution is now also covered by a regulatory regime.

Pre-marketing

According to § 1 para. 19 no. 29a KAGB-neu, pre-marketing is defined as follows:

"Pre-Marketing is the direct or indirect provision by or on behalf of an AIF management company of information or communication about investment strategies or investment concepts to potential professional and semi-professional investors domiciled or having their registered office within the scope of this Law or to professional investors domiciled or having their registered office in a Member State of the European Union or in another State party to the Agreement on the European Economic Area, with the aim of determining, the extent to which investors are interested in an AIF or a sub-investment fund which is either not yet authorised or is authorised but has not yet been notified for marketing in the State in which the potential investors are domiciled or have their registered office, which shall in no case constitute an offer to or a placement with the potential investor to invest in the units or shares of that AIF or sub-investment fund. "We already informed about the exact changes within the KAGB as well as the differentiation between the preliminary stage of pre-marketing and distribution within the meaning of section 293 KAGB in our Client Alert of 23 February 2021.

The ESMA Final Report

As expected, ESMA has now published its final report on the guidelines on marketing communications under the Regulation on facilitating the cross-border marketing of investment funds on 27 May 2021 (see ESMA press release: ESMA publishes guidance on funds' marketing communications (europa.eu) as well as the full text of the final report.

The new guidelines are intended to enhance investor protection by promoting the standardisation of marketing communication requirements as an essential element of the distribution of investment funds within Europe. In particular, ESMA's guidelines contain a catalogue of concrete examples of which documents fall under the concept of a marketing or advertising communication and which do not. The interpretation of the guidelines thus goes far beyond aspects of pure pre-marketing and its scope of application.

In particular, promotional communications or marketing communication documents must be fair, clear and not misleading, thus satisfying the "triptych" of requirements for information and promotional communications.

According to the ESMA guidelines, the following documents shall be considered as marketing communications in the future:

  • posts promoting a UCITS or an AIF (regardless of the medium),
  • messages disseminated on a social media platform where such messages relate to any features of a UCITS or an AIF,
  • marketing material addressed individually to investors or potential investors, as well as documents or presentations made available by a UCITS management company, an AIFM, a EuVECA manager or a EuSEF manager to the public on its website or in other places (registered office of the fund manager, office of the distributor, etc.),
  • communications promoting a UCITS or an AIF and addressed to investors or potential investors located both in the home Member State of the fund manager and in a host Member State,
  • communications originating from a third party and used by a UCITS management company, an AIFM, a EuVECA manager or a EuSEF manager for marketing purposes.
  • However, such marketing communications shall not be considered as such:
  • legal and regulatory documents/information of a fund,
  • company announcements broadcast by the fund manager describing its activities or some recent market developments (e.g. quarterly or half-yearly results, dividend announcements, organisational announcements or changes in management),
  • short messages distributed online, in particular on social media platforms (e.g. Twitter, LinkedIn, Facebook, Instagram, Tiktok, Youtube, Discord, etc.) which only contain a link to a webpage where a marketing communication is available but which do not contain any information about a specific AIF, UCITS or group of AIFs or UCITS, as well as
  • information or communications issued in the context of pre-marketing as defined in Article 4 (1) (aea) of Directive 2011/61/EU.

Similar lists can already be found in Section 293 (1) sentence 2 KAGB as well as in publications of BaFin on the interpretation of the term "distribution", so that the ESMA guidelines have a clarifying effect in this respect. It is to be expected that BaFin, within the framework of the comply-or-explain procedure applicable to guidelines (unlike FAQs) and now to be carried out, will determine to follow these guidelines in its administrative practice.

However, it remains open and in need of clarification whether the use of documents and actions that do not qualify as marketing communications can nevertheless trigger pre-marketing (e.g. by way of an overall view of the behaviour of a provider or a sales unit), or whether there is an area of information that lies outside of any marketing, such as the transmission of legally required publications. Here, a clarification by the supervisory authorities, also by way of FAQs, would be desirable.

As shares and units in investment funds are financial instruments under German securities trading law, documents classified as marketing communication or advertising material must in particular also meet the requirements of BaFin's "Minimum Requirements for Compliance", the so-called MaComp. A compliance check is therefore recommended with regard to the entry into force of the new pre-marketing rules in August 2021.

Schalast Investment Law Advice

We will be more than happy to advise you on all questions regarding the impact of the new ESMA guidelines as well as on investment and tax law issues in general.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.