CSSF Clarifies Marketing Rules In Updated AIFMD Law Q&A

On August 10, the CSSF issued the latest update of its Frequently Asked Questions document on the grand duchy's law of July 12, 2013 implementing the AIFMD and the European Commission's Level 2 regulation on implementation of the directive, last revised on December 29, 2014.

The FAQ document has now run to nine versions over the past year and a half. Its aim is to highlight aspects of the AIFMD rules from a Luxembourg perspective, for the benefit primarily of alternative funds and managers established in the grand duchy. It complements Q&A documents on the AIFMD published by ESMA, itself most recently updated last month, and by the European Commission.

The FAQs cover issues including the scope of the law, the authorisation and registration regimes applicable to alternative managers, delegation requirements, entry into force of the law and duration of transitional provisions, the scope of authorised managers' activities, depositary requirements, the application of the AIFMD passport to Luxembourg managers and funds as well as to foreign managers marketing in Luxembourg, reporting, valuation, transaction costs, managers' capital requirements, and co-operation agreements signed by the CSSF with non-EU regulators.

The new version most notably aims to provide clarity on how marketing and reverse solicitation are understood by the CSSF. The regulator says that since there is no guidance on European level regarding exactly what marketing consists of, the views of different EU regulators may vary, and the same applies to "reverse solicitation" or "passive marketing", activities to which the AIFMD marketing rules do not apply.

Luxembourg's 2013 legislation defines marketing as a direct or indirect offering or placement at the initiative of the manager or on its behalf of units or shares of an alternative investment fund it manages to or with investors domiciled or with a registered office within the EU. Marketing takes place when the fund, the manager or an intermediary seeks to raise capital by actively making fund shares or units available for purchase by a potential investor.

The CSSF says merely presenting draft documentation on a fund to prospective investors does not in itself constitute marketing, provided that the documents cannot be used to make a formal subscription or investment commitment. The manager may present documents to potential investors even before the regulator has received notification, although no subscriptions can be validly...