Cross-border distribution of investment funds in Europe – Finance and Banking

Cyprus: Cross-border distribution of investment funds in Europe

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New EU rules on cross-border distribution of AIFs and UCITS

The European Union has taken measures to facilitate the cross-border distribution of funds (both collective investment undertakings “UCITS” and alternative investment funds “AIF” by introducing the package of measures on the cross-border distribution of funds (the ” CBDF legislation ”).

CBDF legislation includes a Directive (EU) 2019/1160 amending both the UCITS directive and the AIFMD and a Regulation 2019/1156 supplemented by the ESMA guidelines on marketing communication for UCITS and AIFs published on May 27, 2021.

The directive was implemented in Cyprus with the publication on 18e October 2021 in the official journal of amendments to legislations 135 (I) / 2021 and 134 (I) / 2021 to the law on alternative investment fund managers as well as to the law on undertakings for collective investment (UCI) with variable capital respectively.

The new rules strengthen the harmonization of the marketing of AIFs and UCITS, reduce regulatory obstacles, improve profitability and strengthen investor protection.

Summary of key points

The directive introduces rules concerning:

  • “Pre-marketing” of AIFs
  • proximity facilities for UCITS and AIFs sold to individual investors
  • alignment of the procedures and conditions for denotifying UCITS and AIF funds in a host Member State.
  • alignment of certain notifications concerning the marketing of an EU AIF or UCITS in a host Member State.

The regulation contains rules on:

  • marketing communication requirements
  • verification of marketing communications by regulators
  • the creation of central databases for the publication of
    • national marketing requirements
    • fees and charges
    • a list of AIFs, UCITS and their managers.

Next steps

Fund managers who undertake marketing activities for UCITS or AIFs in the EU, or who engage distributors to market UCITS or AIFs in the EU will need to consider whether the new framework requires them to make changes to the their existing cross-border distribution agreements and / or marketing materials.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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