The Finnish Parliament has finally approved the implementing legislation of Directive (EU) 2019/1160 on the cross-border distribution of collective investment undertakings (“CBDF Directive”), the EU’s regulatory framework aiming to harmonise the cross-border distribution of investment funds across EU Member States. The deadline for national implementation has been exceeded by several months, but the national legislation is now set to enter into force on 1 December 2021. This legal update focuses on the national gold-plating introduced by the implementation and highlights certain points to consider in relation to alternative investment funds (“AIFs”) and alternative investment fund managers (“AIFMs”).
The Finnish implementation of the CBDF Directive has been gold-plated to some extent. The main differences include the following:
- Pre-marketing rules apply also to non-EEA AIFMs as well as registered (sub-threshold) AIFMs pre-marketing AIFs they manage.
- Pre-marketing is not restricted to professional clients only, and EEA AIFMs may pre-market to retail investors as well. Pre-marketing by a non-EEA AIFM remains restricted to professional clients only.
- The deregistration process described below applies also to sub-threshold AIFMs.
AIFMs wishing to pre-market/market into Finland should also consider, for example, the following matters:
- What constitutes pre-marketing / marketing: The introduction of the harmonised definition of pre-marketing will have an effect on the national interpretation as to what actually constitutes marketing (e.g. what documents may be provided to potential investors during pre-marketing).
- Pre-marketing conducted by third parties: The CBDF Directive’s rules on pre-marketing conducted by third parties will also apply to non-EEA AIFMs and AIFs as well as registered (sub-threshold) AIFMs/AIFs, i.e. certain third parties such as duly licensed and passported investment firms and credit institutions will be able to pre-market AIFs into Finland subject to the relevant AIFM complying with the pre-marketing process.
- Disclaimers and documentation requirements: Certain documents provided as part of pre-marketing are subject to disclaimer requirements. Furthermore, any pre-marketing must be appropriately documented.
- No transitional provisions: No transitional provisions were introduced concerning the application of the new rules to AIFMs which have started pre-marketing AIFs prior to the national implementation, and no further guidance has yet been issued by the Finnish FSA. Therefore, the current working assumption is that any AIFMs pre-marketing into Finland that are required to submit the required pre-marketing notification to the Finnish FSA must do so within two weeks from the implementation date.
- Reverse solicitation restrictions: The CBDF Directive’s rules on the preclusion of reverse solicitation have been implemented to apply to all AIFs. I.e. any subscriptions by investors in an AIF within 18 months of the commencement pre-marketing activities related to that AIF (irrespective of whether such investor has, in fact, received any pre-marketing) are considered the result of marketing and will trigger the marketing notification (or passporting) requirements under the Finnish AIFM Act.
- Deregistration process: Deregistering an AIF from marketing in Finland is now subject to a harmonised process that includes, for example, submitting a deregistration notification with the Finnish FSA, making a public offer to repurchase all AIF units/shares held by investors in Finland (not applicable to closed-ended AIFs) and a public notice of the intention to terminate marketing. Furthermore, there is a black-out period of 36 months with respect to pre-marketing the deregistered AIF or similar investment strategies or investment ideas in Finland.
While the Finnish FSA is yet to issue any guidelines on the practical matters in relation to, for example, the pre-marketing notifications or deregistration procedures, we would hope that the regulator issues such guidance within short.