Melville Rodrigues focuses on four major markets in Europe to highlight how they have revised their private placement rules
Traditionally, non-EU managers have marketed their real estate funds in the EU under national private placement rules, and these rules differ between each EU member state.
When implementing the Alternative Investment Fund Managers Directive (AIFMD) many national regulators have revised their private placement rules and, in some cases, the regulators have tightened or even abolished their placement rules. Non-EU managers have to comply with a patchwork of revised placement rules in order to promote funds within the EU.
The EU regulator, the European Securities and Markets Authority (ESMA), has been negotiating co-operation arrangements with various non-EU regulators. On the basis of these arrangements being backed up with bilateral agreements between regulators within and outside the EU, non-EU managers should then be entitled to EU cross-border marketing passports. This would allow them to market their funds across the EU and is envisaged for 2015: the managers would no longer be required to comply with the placement rules. Once the non-EU passports become operational, the national private placement rules will be phased out, although not before 2018.
Until the introduction of the non-EU passports, non-EU managers will be entitled to market funds under the national private placement rules to investors more easily in certain EU member states than others.
The German law implementing AIFMD, the German Capital Investment Code, allows for domestic German, as well as EU and non-EU funds, to be placed only in accordance with a dedicated set of rules. The rules no longer provide for a private placement exemption.
The code imposes comparably high hurdles to the placement of non-EU funds or funds managed by non-EU managers. Those require, inter alia, for placement in Germany that cooperation agreements are in place between the German regulator and the regulator of the fund’s and/or manager’s country of domicile.
Marketing of a fund (within scope of the directive) – that does not benefit from the directive passporting regime for EU managers – is prohibited unless the fund obtains a specific authorisation from the Autorité des Marches Financiers.
The concept of private placement under French Law is based on the definition given under the Prospectus Directive, and it benefits closed-ended funds but not open-ended funds.
Private placement covers any offer of financial securities in France:
• Made to qualified investors (investors qualifying as professional investors or eligible counterparties under MiFiD);
• Made to 150 natural or legal persons per EU member state, other than qualified investors;
• Where the total amount of the offer in each EU member state is less than €100,000;
• Where the total amount of the offer in each EU member state is between €100,000 and €5m and the transaction concerns financial securities accounting for no more than 50% of the capital of the issuer;
• Where the transaction is intended for investors acquiring at least €100,000 worth, per investor and per transaction, of the relevant financial securities;
• Where the transaction concerns financial securities with a minimum denomination of at least €100,000.
The French private placement rules have not changed after implementation of the directive.
A non-EU manager of a fund is permitted to distribute funds in the Netherlands without a licence if the offer is solely addressed to qualified investors.
The following conditions must also be satisfied:
• There is an appropriate co-operation arrangement between the Dutch Authority for
Financial Markets (Autoriteit Financiële Markten) and the supervisory authorities of the third country where the non-EU AIFM is established;
• The third country where the non-EU AIFM is established is not listed as a non-co-operative country and territory by the Financial Action Task Force (FATF);
• The manager complies with certain transparency requirements;
• They are managers of collective investment undertakings that raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors and do not qualify as UClTS.
A manager of a fund that is based in Guernsey, Jersey or the US (provided that the US investment funds are under the supervision of the SEC) and is adequately supervised in its country of origin, may distribute in The Netherlands without a licence, including to non-qualified investors. The funds must comply with certain information requirements.
The Dutch private placement rules have changed in connection with the implementation of the directive. In addition to the designated countries regime and the exemption for offers that are solely addressed to qualified investors, Dutch law also used to include an exemption for offers addressed to fewer than 100 non-qualified investors, or offers of units that could only be acquired for at least €100,000 per investor. These exemptions no longer exist.
A non-EU manager is simply required to notify the Financial Conduct Authority (FCA) of its intention to market under the UK private placement regime, providing certain information about the fund and confirming that it meets the following regulatory conditions:
• The manager is the person responsible for complying with the implementing provisions relating to the marketing of the fund;
• It complies with certain transparency requirements;
• Appropriate co-operation arrangements are in place between the FCA and the regulatory authority of the fund’s/manager’s state;
• The country where the non-EU manager and, if applicable, the non-EU fund is established must not be listed as a non-co-operative country and territory by the FATF.
Melville Rodrigues is a partner at CMS Cameron McKenna