The European Securities and Markets Authority ("ESMA") on 27 May 2021 published the final report on its "Guidelines under the Regulation on cross-border distribution of funds", specifying the requirements that funds’ marketing communications must meet (the "Final Report").
Please remember that Regulation (EU) 2019/1156 of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings (the “Regulation”) specifies that AIFMs, EuVECA managers, EuSEF managers and UCITS management companies shall ensure that marketing communications addressed to investors are identifiable as such and describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner, and that all information included in marketing communications is fair, clear and not misleading. In addition, the Regulation requires ESMA to develop guidelines on the application of these requirements for marketing communications, taking into account the on-line aspects of such marketing communications.
On 8 November 2020, ESMA published a Consultation Paper on the proposed draft Guidelines which closed on 8 February 2021. The Final Report considered here summarise the comments received and highlighting the amendments and clarifications introduced in the final guidelines to consider the feedback received during the consultation.
The purpose of the Guidelines is to clarify the requirements that funds’ marketing communications must meet, which is to:
- be identifiable as such: on this matter ESMA requires, inter alia, the inclusion of sufficient information in the communications to make it clear that they have a purely marketing purpose and of a specific disclaimer, clearly displayed in the marketing communication;
- describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner: for example, ESMA specifies that marketing communications should not refer to the rewards without referring to the risks and both the risks and rewards should be mentioned either at the same level or one immediately after the other; and
- contain clear, fair and not misleading information, taking into account the on-line aspects of marketing communications: on this topic, ESMA points out that the information presented in the marketing communication should be consistent with the legal and regulatory documents of the promoted fund, as applicable, and gives some requirements to be met if marketing communication describes some features of the promoted investment (use of leverage, investment policy, etc.). In addition, ESMA provides some guidelines to be met by marketing communications when they include information on risks and rewards, on costs, on past performance and expected future performance and on sustainability-related aspects.
The Final Report does not intended to replace existing national requirements on the information to be included in marketing communications (such as those relating to the fiscal treatment of the investment in the promoted fund) to the extent these are compatible with any existing harmonised EU rules (e.g. rules on disclosure of costs or performance in the KIID should not be contradicted or diminished by different national disclosure requirements on costs or performance in marketing communications).
The Final Report will be translated into the official languages of the EU and published on ESMA’s website. The publication of the translations will trigger a two-month period during which national competent authorities must notify ESMA whether they comply or intend to comply with the Guidelines. The guidelines will apply 6 months after the date of the publication of the translations.
Authors: Luca Lo Pò and Marta Tiraboschi