Since 2 February 2022, management companies of AIFs and UCITs
must comply with the new ESMA Guidelines on Marketing
Communications which further outline the harmonised marketing
communication requirement across the EEA introduced by the
Cross-border Distribution of Funds Regulation.
By adopting Regulation (EU) 2019/1156 on facilitating
cross-border distribution of collective investment undertakings
(‘CBDF Regulation‘) and Directive (EU) 2019/1160 on facilitating
cross-border distribution of collective investment undertakings,
the EU aims to create a level playing field for the cross border
marketing and distribution of funds in the EEA, while at the same
time ensuring more uniform and better protection for investors.
Following the CBDF Regulation, applicable as of 2 August 2021,
AIFMs, EuVECA managers, EuSEF managers and UCITS management
companies must ensure that all marketing communications addressed
to investors are:
- identifiable as being marketing communications, and
- describe the risks and rewards of purchasing units or shares of
an AIF/UCITS in an equally prominent manner, and - contain information which is fair, clear and not
misleading.
The ESMA guidelines on marketing communications
under the Regulation on cross-border distribution of funds
(‘ESMA Guidelines‘) aim to further clarify
the requirements that funds’ marketing communications must meet
when directed at professional or retail investors.
Do not hesitate to contact the authors for more information
about the marketing of funds in one of our home jurisdictions or
regarding additional national requirements regarding marketing
communications.
What is marketing communication?
No definition of ‘marketing communication’ can be found
in the CBDF Regulation or in the ESMA Guidelines. However, the ESMA Guidelines
classify a non-exhaustive list of type of communications as
marketing communications (or not):
Requirements that funds’ marketing communications must
meet
If a communication qualifies as a ‘marketing
communications’ in the meaning of the CBDF Regulation or the
ESMA Guidelines, such communications must comply with strict legal
requirements.
1: check if the marketing communication requires NCA
approval
If applicable, any reference to a UCITS or an AIF in a press
article, advertisement or press release on the internet or on any
other medium may only be published after the home national
competent authority (‘NCA’) of the promoted fund has
granted approval.
For a first overview of the national rules applicable to the
marketing of funds, check out the ESMA overview.
2: include an identification as marketing
communications
Marketing communications must be clearly labelled as marketing
documents and inform (potential) investors that the communication
is not a contractually binding document, or an information document
required by law. This requirement will be deemed complied with when
the marketing communication i) mentions clearly the terms
“marketing communication” (preceded by the
“#-symbol for social media use) and ii) includes a disclaimer
such as the following:
“This is a marketing communication. Please refer to the
[prospectus of the [UCITS/ AIF/EuSEF/EuVECA]/Information document
of the [AIF/EuSEF/EuVECA] and to the [KIID/KID] (delete as
applicable)] before making any final investment
decisions.” For on-line marketing communication, a
shorter identification of the marketing purpose of the
communication is acceptable (e.g. the mere use of the terms
“Marketing Communication” in the case of a banner or
short videos or the “#MarketingCommunication” hashtag for
social media platforms).
3: Equally describe risks and rewards
When a marketing communication includes information on potential
benefit of purchasing units or shares of a fund (rewards), risk
disclosure should be included also using the same font size in the
body of the text and not in a footnote or in small characters. Both
risks and rewards should be mentioned either at the same level or
one immediately after the other.
The ESMA Guidelines also mention that the disclosure of the risk
profile of the promoted fund in a marketing communication should
refer to the same risk classification as that included in the KID
or KIID.
In relation with the AIFs open to retail investors, if
applicable, the marketing communication should clearly mention the
illiquid nature of the investment.
4: The marketing communication must be suitable for the
targeted (potential) investors
All marketing communications should contain fair, clear and not
misleading information. The level of information presented, and the
wording used should be adapted to whether investment in the
promoted fund is open to retail investors or professional
investors. Moreover, the marketing communication should be written
in the official languages, or in one of the official languages,
used in the part of the Member State where the fund is distributed,
or in another language accepted by the NCA of that Member
State.
5: The information must be consistent with other
documents
The information presented in the marketing communication must be
consistent with the legal and regulatory documents of the promoted
fund such as the prospectus, the offering memorandum (or PPM), the
KID or KIID, annual reports,.
6: Pay special attention to the descriptions of the
features of the investment
When a marketing communication describes some features of the
promoted investment, such description should be up to date,
accurate and proportionate to the size and format of the
communication. The marketing communication should include at least
a short description of the investment policy of the fund and an
explanation on the types of assets into which the fund may
invest.
The information contained in marketing communication should be
presented in a way that is likely to be understood by the average
member of the group of investors to whom it is directed or by whom
it is likely to be received.
All statements embedded in the marketing communication should be
adequately justified based on objective and verifiable sources,
which should be quoted.
7: Include sufficient context regarding the associated
costs
When referring to the costs associated with purchasing, holding,
converting or selling units or shares of an AIF/UCITS, marketing
communications should include an explanation to allow investors to
understand the overall impact of costs on the amount of their
investment and on the expected returns.
Where the currency applicable to the costs is different from
that of the targeted investors’ residency, the marketing
communications should clearly include the currency in question, as
well as a warning that the costs may increase or decrease as a
result of currency and exchange rate fluctuations.
8: Information on past performance and expected future
performance
In addition to the required up-to-date information on features
of the investment (item 6 above), in a marketing communication
information on past performance of the promoted
fund should be consistent with the past performance included in the
prospectus, the offering memorandum (or PPM), the KID or KIID or
other regulatory provision.
The past performance is to be disclosed for the preceding 10
year for funds establishing a KIID, or for the preceding five years
for other funds, or for the whole period for which the relevant
funds have been offered, if less than five years. Past performance
information should always be based on complete 12-months periods,
but this information may be supplemented with performance for the
current year updates at the end of the most recent quarter.
When the information on past performance is included, this
information should be preceded by the following statement:
“Past performance does not predict future
returns“.
Information on expected future performance
should be based on reasonable assumptions supported by objective
data. It should be disclosed only prefund and on a time horizon
consistent with the recommended investment horizon of the fund.
If the information on expected future performance is based on
past performance and/or current conditions, this information should
be preceded by the following disclaimer: “The scenarios
presented are an estimate of future performance based on evidence
from the past on how the value of this investment varies, and/or
current market conditions and are not an exact indicator. What you
will get will vary depending on how the market performs and how
long you keep the investment/product.“
Marketing communications should also include at least a
disclaimer according to which future performance is subject to
taxation which depends on the personal situation of each investor
and which may change in the future.
9: Include sufficient sustainability
information
When a marketing communication refers to the
sustainability-related aspects of the investment in the promoted
fund, it should be consistent with the information included in the
legal and regulatory documents of the promoted fund such as the
website, periodic reports and relevant pre-contractual
documentations as required following the Sustainable Finance Disclosure Directive and Taxonomy Regulation.
In particular, the information should not outweigh the extent to
which the investment strategy of the product integrates
sustainability-related characteristics or objectives.
For more general information on sustainability related
information to include in a fund’s documentation, please read
our other articles on the mandatory ESG-disclosure resulting from
the Sustainable Finance Disclosure Regulation or
the Taxonomy Regulation.
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.