Cross-border fund distribution: ESMA consults on guidance for fund marketing communications has been saved
Cross-border fund distribution: ESMA consults on guidance for fund marketing communications
11 November 2020
Regulatory News Alert
Context and objectives
On 9 November 2020, the European Securities and Markets Authority (ESMA) launched a consultation on the draft guidelines on marketing communications under the Regulation (EU) 2019/1156 of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings (CBR).
According to Article 4(1) of the CBR, these guidelines apply to the following fund managers: undertakings for collective investments in transferable securities (UCITS) management companies (including any UCITS not designated as a UCITS management company), alternative investment fund (AIF) managers, European venture capital fund (EuVECA) managers and European social entrepreneurship fund (EuSEF) managers.
These fund managers shall ensure that:
- All marketing communications addressed to investors are identifiable as such;
- They describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner; and
- All information included in marketing communications is fair, clear and not misleading.
Marketing communications in scope
The guidelines shall apply to all marketing communications addressed to investors in UCITS and AIFs, including those set up as EuVECAs, EuSEFs, European long-term investment funds (ELTIFs) and money market funds (MMFs). These include:
- All online advertising messages for a UCITS or AIF, as well as webpages, video presentations, live presentations, radio messages or factsheets.
- Messages published on any social media platform.
- Marketing materials addressed individually to investors or potential investors, as well as documents or presentations made available by a fund manager to the public on its website or in any other location.
- Communications advertising a UCITS or AIF addressed to investors or potential investors located in the home Member State (MS) of the fund manager or in a host MS.
- Communications describing the characteristics of a UCITS or AIF.
- Communications by a third party that is used by a fund manager for marketing purposes.
Common principles for marketing communications
As specified in Article 4(6) of the CBR, these guidelines aim to specify the requirements for marketing communications as set out in Article 4(1) of the CBR, in particular:
- “Identification of marketing communications as such”: these communications should include a short disclaimer to:
o Make it clear that they have a marketing aim;
o Draw the attention of investors or potential investors to the fact that an investment decision should not be
based on this marketing communication only; and
o Mention the existence of the legal and regulatory documents of the promoted fund.
- “Description of risks and rewards in an equally prominent manner”: the format of the description should allow investors or potential investors to identify the promoted fund’s risks and rewards in a clear and easily understandable manner:
o The font, size and position used to describe the rewards should be the same as those used to describe the risks;
o Information of the risks should not be disclosed in a footnote or in small characters within the main body of the communication; and
o Both the risks and rewards should be mentioned either at the same level or one immediately after the other.
- “Fair, clear and not misleading character of marketing communications”: all marketing communications should be consistent with, and not contrary to, the legal and regulatory documents of the promoted fund (such as the fund’s investment policy, underlying assets, any information on costs, etc.).
ESMA invites feedback from interested stakeholders on the proposed guidelines by 8 February 2021 and will consider this feedback with a view to issuing final guidelines by 2 August 2021 at the latest.
The guidelines will apply either from their publication date or from 2 August 2021, whichever comes first.
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