{"id":160,"date":"2021-11-24T11:00:00","date_gmt":"2021-11-24T11:00:00","guid":{"rendered":"https:\/\/iqeq.com\/gb\/2021\/11\/24\/cbdf-implications-reverse-solicitation-how-adapt-your-eu-aif-marketing-strategy\/"},"modified":"2026-03-13T12:11:19","modified_gmt":"2026-03-13T12:11:19","slug":"cbdf-implications-reverse-solicitation-how-adapt-your-eu-aif-marketing-strategy","status":"publish","type":"post","link":"https:\/\/iqeq.com\/gb\/insights\/cbdf-implications-reverse-solicitation-how-adapt-your-eu-aif-marketing-strategy\/","title":{"rendered":"Cross-Border Distribution Framework (CBDF) implications for reverse solicitation: How to adapt your EU AIF marketing strategy"},"content":{"rendered":"
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Post-Brexit, UK fund managers<\/a> have had to keep track of a\u00a0lot<\/em>\u00a0of regulatory upheaval. Some EU regulations were transposed into UK law, others weren\u2019t, and there are still a few dangling threads with no clear decision. So don\u2019t fret if you haven\u2019t yet processed the rules that now apply to non-EU alternative investment fund managers (AIFMs) who want to market their funds in the European Union.<\/p>\n

The\u00a0Cross Border Distribution of Funds (CBDF) Directive and CBDF Regulation<\/a>, launched in August 2021, explicitly defines pre-marketing activity for all EU jurisdictions\u2014and, by extension, the use of reverse solicitation\u2014for non-EU fund managers in addition to AIFMs within the EU.<\/strong><\/p>\n

Fund managers have traditionally relied on reverse solicitation to market funds in Europe, but CBDF changes that landscape dramatically. The new rules amend the existing EU Alternative Investment Fund Managers Directive (AIFMD<\/a>) to define what qualifies as pre-marketing. Pre-marketing a fund\u2014even a fund that has not been set up yet\u2014precludes you from reverse solicitation for 18 months.<\/p>\n

Under the new regulations, there are two primary avenues open to non-EU fund managers looking to market alternative investment funds in the EU:<\/strong><\/p>\n

    \n
  1. National private placement\u00a0regimes (NPPRs)<\/li>\n
  2. Third-party AIFM services<\/li>\n<\/ol>\n

    We know better than most how quickly the landscape of regulatory compliance can shift. To save UK and U.S. fund managers from making a costly marketing mistake in the EU, we\u2019ve created this post to help guide firms toward their ideal EU AIF solution.<\/p>\n

    Pre-marketing and reverse solicitation under CBDF<\/h2>\n

    Suppose a professional EU investor subscribes to an AIF within 18 months of initial pre-marketing activities related to that fund. Under CBDF, their subscription will be considered the result of marketing (therefore entailing\u00a0AIFMD<\/a>\u00a0marketing notifications).<\/p>\n

    In essence, this means that pre-marketing a fund in the EU precludes fund managers from using\u00a0<\/strong>reverse solicitation<\/strong><\/a>\u00a0for 18 months.<\/strong><\/p>\n

    It takes very little activity for an EU manager to fall under pre-marketing regulation. The moment you tell an investor, \u201cWe\u2019re planning a fund, our investment focus is X, and our name is ABC Management,\u201d you\u2019ve pre-marketed that fund. Because you\u2019ve taken pre-marketing steps, you cannot reverse solicit for 18 months following that announcement. This is a stark change from previous regulation, which held a looser definition of pre-marketing and enabled fund managers to rely on reverse solicitation as a general strategy\u2014a strategy that is no longer feasible.<\/p>\n

    As a former member of the single market, UK-regulated firms can no longer rely on passporting rights, either. There are ongoing discussions about whether the EU might treat the UK as an equivalent jurisdiction, but the outcome is unlikely to be finalised any time soon.<\/p>\n

    Because the UK has exited the EU, it will not be implementing the CBDF. UK managers will be treated as non-EU AIFMs in the same manner as U.S. and other non-EU managers.<\/p>\n

    However, U.S. and UK managers may still be exposed to CBDF restrictions. Each EU member state needs to implement the CBDF, deciding whether the CBDF rules apply to EU and non-EU managers in equal measure. Third-party AIFMs must comply with the CBDF, which means that non-EU managers leveraging third-party AIFM services will be subject to the new rules. The same may be true when relying on NPPRs, depending on the decisions of the Member State.<\/p>\n

    Moving forward, non-EU fund managers looking to market their AIFs in the EU must be mindful of how they structure their approach.\u00a0There are now two primary routes to market: NPPR and third-party AIFM.<\/strong><\/p>\n

    Marketing AIFs under NPPR<\/h2>\n

    The National Private Placement Regime (NPPR<\/a>) is a mechanism that allows non-EU AIFMs to continue marketing funds in Europe that otherwise cannot be marketed under AIFMD. Managers must ensure compliance with the NPPR rules outlined in the AIFMD and the requirements of local regulators, as some requirements vary slightly by country. For this reason, where funds once took a blanket approach and marketed throughout Europe using passporting, applying for access to just three or four jurisdictions via NPPR is much more practical under the new rules.<\/p>\n

    NPPR requires specific provisions, including risk oversight and compliance with depositary requirements. The primary steps firms must follow are:<\/p>\n

      \n
    1. File NPPR notification<\/li>\n
    2. Make an Article 23 AIFMD pre-investment disclosure (AIFMD Investor Disclosure Statement)<\/li>\n
    3. Draft an Annual Report (covering financial statements, financial activities, and remuneration disclosures)<\/li>\n
    4. Make annual or more frequent reports to local regulators (Annex IV reporting covering asset values, strategy focus, principal exposures of funds, and risk and liquidity profiles, amongst other areas)<\/li>\n<\/ol>\n

      NPPR notification<\/h3>\n

      Firms must\u00a0file an NPPR notification<\/a>\u00a0if they are an above-threshold third country AIFM marketing an AIF, regardless of whether the AIF is a UK fund or belongs to a third country. Once the FCA receives the filing, there is no approval waiting time; firms can start marketing the fund immediately.<\/p>\n

      Firms that are unregistered with the FCA will need to\u00a0register for Connect access<\/a>\u00a0and contact the FCA for a NPPR Access Code.<\/p>\n

      AIFMD investor disclosure statement<\/h3>\n

      Firms must provide a pre-investment disclosure to all European investors before they invest in the AIF. The pre-investment disclosure must include descriptions of:<\/p>\n