Cross Border Fund Distribution (CBFD)

Entry into force

2 August 2019

What is the “Cross-Border Distribution of Funds” (CBDF) package?

As part of the implementation of the Capital Markets Union, the European Commission (EC) has published new legislation on the cross-border funds distribution:

• Regulation (EU) 2019/1156 on facilitating the cross-border distribution of collective investment undertakings. In particular, it introduces rules regarding marketing communications, transparency of fees charged by national authorities, the publication of national marketing rules, and the centralized database managed by ESMA on funds marketed in the EU.

• Directive (EU) 2019/1160, which amends the UCITS Directive (2009/65/EC) and the AIFMD (2011/61/EU). In particular, it introduces harmonized pre-marketing rules for AIFs, harmonized notification procedures, rules governing the withdrawal of a fund from a market, and requirements regarding facilities offered to local investors.

How does this legislative package affect the cross-border distribution of funds?

• The AIFM¹ and UCITS² directives,

• and the fund regulations, including the European Venture Capital Funds (EuVECA) Regulation and the European Social Entrepreneurship Funds (EuSEF) Regulation.

The EC’objective is to reduce regulatory barriers to the cross-border distribution of investment funds, notably through:

• Improving transparency with regard to the legal and administrative requirements (notification, marketing material, local support to investors, etc.) requested by the European Union and Member States in this area as well as fees charged by national authorities.

• Guaranteeing more consistency in the method of calculation of these costs.

• Proposing a harmonized definition of pre-marketing.

• Specifying the administrative requirements called “facilities” imposed by some national authorities.

The EC expects from these measures a simplification of the procedures for the distribution of funds as well as a reduction of induced costs, and correlatively an increase in the cross-border distribution of the latter.

Scope

• Requirements as regards marketing by asset managers (Regulation).
• Increased transparency for information on national marketing requirements and fees from NCA (National Credit Act Regulation).
• Alignment of procedures and conditions for the de-notification of UCITS and AIF³ funds from national markets (Directive).
• Changes in relation to local facilities for UCITS and AIFs sold to retail investors: Removing the requirement for physical presence; The choice of how facilities to support local investors are provided (local presence or electronically) is to be left with the asset manager (Directive).  
• Amendments related to PRIIPs⁴: PRIIPS review delayed by one year to December 2019 and 2-year extension of the UCITS exemption from PRIIPs until December 2021 (Directive).
• Creation of an ESMA⁵ Central database of all managers, AIFS and UCITS marketed in other EU countries (Regulation & Directive)
• Introduction of pre-marketing for AIFs, EuVECA and EuSEF (Regulation & Directive)

¹ AIFM: Alternative Investment Fund Manager
² UCITS: Undertakings for Collective Investments in Transferable Securities
³ AIF: Alternative Investment Funds
⁴ PRIIPS:  Packaged retail investment and insurance-based products
⁵ ESMA: European Securities and Markets Authority