New fund marketing rules

Further to the new EU Directive and EU Regulation on cross-border distribution of funds, marketing of funds will be subject to new rules from 2 August 2021. Further important changes will apply as soon as the new ESMA Guidelines become applicable. These new rules will probably have an impact on marketing materials, irrespective of whether they are online, by social media or in hard-copy.

Cross-border fund distribution: new rules

In June 2019, new rules were adopted on the cross-border distribution of collective investment undertakings by means of the Directive on cross-border distribution of collective investment undertakings (2019/1160/EU) (CBDD) and the Regulation on cross-border distribution of collective investment undertakings (EU/2019/1156) (CBDR). Apart from the CBDD and the CBDR, ESMA will issue final guidelines on marketing communications which shall apply from six months following publication. Dutch law will also be amended in line with the CBDD but the bill is still pending.

The new rules amend the existing AIFMD and UCITS regimes with a view to harmonisation of distribution of funds in the EU. As a result, marketing of funds is the central theme of the new rules.

Scope unclear

There is some ambiguity about the scope of the new rules. While technically the new rules only apply to licensed AIFMs and UCITS ManCos, the general principle is that EU AIFMs should not be disadvantaged relative to non-EU AIFMs. One cannot therefore exclude that the new rules will also apply to non-EU AIFMs. This will largely depend on local implementation. The Dutch implementation bill is however silent on this topic.

Marketing vs. pre-marketing

The new regime draws a clear line between what is considered pre-marketing and marketing of funds.
Pre-marketing precedes marketing and as such, pre-marketing is not marketing and the other way around. There are however situations where pre-marketing will be deemed to be marketing after all, notably in case of subscription within 18 months following the start of pre-marketing.

Without further going into the requirements of pre-marketing, it is important to understand that – in short – while pre-marketing comes with certain restrictions, marketing may ony take place after a cross-border notification has been duly made.

Marketing communications

The CBDR and the ESMA Guidelines include certain quite prescriptive rules on marketing communications. Article 4 of the CBDR starts with the fairly straight forward and standard requirement for fund managers that marketing communications shall be identifiable as such, shall describe risks and rewards and shall be fair, clear and not misleading. The ESMA Guidelines further set out what this general requirement means in practice.

The ESMA Guidelines start by stipulating what constitutes a marketing communication. In short, this includes all messages and material, irrespective of the medium, relating to a particular fund (AIF or UCITS). It excludes statutory information (e.g., prospectus, KIID/KID, annual reports, articles and fund terms) and information not relating to a fund. In addition, any information for the purpose of pre-marketing is also excluded. This is understandable as pre-marketing is not considered marketing and has its own standards for information that can be used for this purpose.

As was the case before, where marketing communications are aimed at retail investors in the Netherlands, they shall be in Dutch. Marketing communications to professional investors in the Netherlands may also be in English


The ESMA Guidelines recommend or even require that specific disclaimers and wording will be used in marketing communications:

  • To be identifiable, it is recommended by ESMA that marketing communications include the wording “marketing communication“.
  • Marketing communications shall include a general disclaimer stating
    This is a marketing communication. Please refer to the [prospectus of the [UCITS/AIF/EuSEF/EuVECA]/information document of the [AIF/EuSEF/EuVECA] and to the [KIID/KID] (delete as applicable) before making any final investment decisions.
  • In case of short messages the above general disclaimer may be replaced by the words “MarketingCommunication” or the hashtag “#MarketingCommunication“.
  • In case of use of past performance, the marketing communication shall include:
    Past performance does not predict future returns.
  • In case of use of expected future performance, the marketing communication shall include:
    The scenarios presented are an estimate of future performance based on evidence from the past on how the value of this investment varies, and/or current market conditions and are not an exact indicator. What you will get will vary depending on how the market performs and how long you keep the investment/product.
  • Future perfomance information shall also be accompanied by a disclaimer on future performance being subject to taxation depending on the personal situation of the investor which may change in the future, as well as a statement that investment may lead to a loss if no capital guarantee is in place.

Prescriptions for marketing communications

In addition to requirements on disclaimers, the ESMA Guidelines including some further new requirements depending on the information to be included in the marketing communications:

  • Risks and rewards disclosures should be appropriately balanced, both in content and format. While as such this requirement is not new, the way to secure this is that the font size of risks wording shall be at least equal to the font size of the rewards wording. ESMA also requires that the risks shall be positioned in an equally prominent place, for example in a two-column table mentioning risks and rewards. In addition, at least the risks mentioned in the KIID/KID and the prospectus (!) shall be included. It is unclear how all risks from the prospectus shall be included in marketing communications that are relatively short. I believe that some form of generalisation should still be allowed.
  • Marketing communication for retail funds that provide characteristics of the fund, shall make clear that the investment is in the fund and not in the underlying assets. In addition, the investment policy must be briefly described. It is unclear what constitutes the charateristics of a fund. Presumably this relates to the investment strategy or the underlying assets.
  • If the investment policy is described, the marketing communication shall include “active” or “actively managed” for actively managed funds and “passive” or “passively managed” as well as “index-tracking” for index-tracking funds. The latter category does not include actively managed index-tracking funds as these are considered actively managed. Marketing communications on actively managed index-tracking funds shall explain the use of the benchmark and the degree of freedom to deviate from the benchmark.
  • Short marketing communications on social media shall be as neutral as possible and must include where further information can be found by using a link to the relevant webpage.
  • If costs are mentioned the marketing communication must include information for investors to understand the overall impact on the investment and the overall return.

Action required?

The new rules will have an impact on marketing communications of all funds. Consequently, marketing communications shall be checked on compliance. As indicated, while the CBDD and CBDR apply from 2 August 2021, the ESMA Guidelines apply from six months after final publication, so these are the relevant deadlines for compliance checks. Apart from these checks, the other requirements under the new rules, such as those on pre-marketing and de-notification, may also require attention.

[Dutch] Podcast de rangwisseling van pandrechten

Recent is er een arrest (ECLI:NL:HR:2021:524) gewezen met betrekking tot de rangwisseling van pandrechten. Wat is de essentie van deze uitspraak? Wat is de lijn tot op heden met betrekking tot de rangwisseling van pandrechten? Waarom is de volgorde van pandrechten van belang? Hoe werkt de rangwisseling van pandrechten in de praktijk? Wat is het achterliggende belang voor een rangwisseling? Waarom meewerken aan een rangwisseling? Wat verandert er naar aanleiding van dit arrest voor de praktijk?

Legaltree-partners Onno Hakvoort en Bart Wilton, specialisten financiering en zekerheden, in gesprek met Legaltree directeur en oud-minister Ard van der Steur over de rangwisseling van pandrechten.

Brexit: three months and counting

Following Brexit on 1 February 2020, the end of the transition period on 31 December 2020 is rapidly approaching. At this stage it is still uncertain if an agreement between the EU and the UK will be reached on the period thereafter so the risk of a hard or no deal Brexit is increasing and mitigating action may be advisable, especially by investment firms who may not be able to rely on an exemption anymore.

Transition period

The Withdrawal Agreement agreed upon between the EU and the UK provided for a transition period that will end on 31 December 2020. At present, only three months of this period are left. However, as there is still no agreement between the EU and the UK on the period following the transition period, the risk of a hard Brexit remains and increases as time lapses.

In case of a hard Brexit, certain EU and Dutch rules and regulations will apply in order to assist UK financial institutions to continue to do business in the Netherlands. Apart from that, certain EU rules and regulations provide for mitigating effects.

Dutch statutory regimes for investment firms and AIFMs

Earlier, two particular Dutch regimes were suggested to mitigate the effects a hard Brexit:

  • UK investment firms would be able to (temporarily) continue to actively service Dutch professional clients on the basis of a proposed amendment of the existing exemption for certain foreign investment firms, thereby allowing UK investment firms to temporarily continue to provide services in the Netherlands. This regime would be similar to the temporary permissions regime in the UK and was expected to last for (at least) two years.
  • UK AIFMs may (temporarily) continue to market their AIFs to qualified investors in the Netherlands on the basis of the existing Dutch national private placement regime under the AIFMD. The AIFMD provided for an end to this regime (originally already in 2018) so also this regime is likely to be of a temporary nature.

However, recently the Minister of Foreign Affairs and the AFM have indicated that the temporary exemption for UK investment firms will not be entering into force upon a hard Brexit. The main reason apparantely being that due to the esarlier postponement of Brexit and the transitition period now ending on 31 December 2020, ample time has been available to UK investment firms and their Dutch client to take the necessary action, thereby taking away the necessity for this temporary exemption.

Private placement to qualified investors will remain possible for UK AIFMs upon a hard Brexit. This requires a registration with the Dutch regulator AFM which is free of charge. In addition, certain ongoing requirements must be met by the UK AIFMs s registered.

Action required?

Now that the end of the transition period is rapdily approaching and there is still no agreement on a soft Brexit, it is advisable to take any further mitigation action required. For UK AIFMs this can be a simple registration with the AFM. UK investment firms actively servicing Dutch clients will now have to consider how they may be able to continue their services. This may require a license in the EU or altogether ceasing actively servicing Dutch clients.

Regulation on Markets in Crypto-assets (MiCA)

Foto: Thought Catalog

A first introduction

On 12 September 2020, a draft Regulation on Markets in Crypto-assets (MiCA) was leaked to the press. While this is only a draft which hasn’t been adopted yet and it is only expected to apply from 18 months after its entering into force (so not before 2022), the draft MiCA Regulation gives material insight in how the EU aims to regulate crypto-assets, thereby using familiar EU banking and financial services regimes.

General view

The draft MiCA Regulation includes many familiar concepts from the existing banking and financial services directives and regulations. To mention a few, the whitepaper requirement is like the prospectus requirement applicable under the Prospectus Regulation whereas the authorization for issuers of asset-referenced tokens and providers of crypto-asset services has similarities with the MiFID II authorization regime. Together with the fact that the draft MiCA Regulation includes a ‘light touch’ market abuse regime that is no doubt derived from the MAR, just like custody and payment requirements that seem to come from the AIFMD and the PSD2, the draft MiCA Regulation also refers to the CRD and the EMD for the authorization of issuers of e-money tokens. All in all, the draft MiCA Regulation seems to be a collection of (parts of) these banking and financial services regimes. A further analysis will have to show to what extent the same level of granularity is aimed for.

It is consequently beyond doubt that the issuance of crypto-assets and the provision of services relating to crypto assets, will become (heavily) regulated just like the provision of banking and financial services in the EU. Even though one of the purposes of the draft MiCA Regulation is to support innovation, this will have a considerable impact on the industry, which at present is largely unregulated. The change by this new regime will therefore be a major one to prepare for in time.

Crypto-assets: definitions

The purpose of the draft MiCA Regulation is to capture all possible crypto-assets that are not already covered by existing EU banking and financial services regimes (financial instruments, (structured) deposits, e-money, or securitisations). As a result, the definition of crypto-assets is deliberately wide and is further divided into three subcategories of utility tokens, asset-referenced tokens, and e-money tokens:

  1. Crypto-assets are “a digital representation of value or rights, which may be transferred and stored electronically, using distributed ledger or similar technology”. This definition aims to correspond with the FATF definition of virtual assets. Examples include crypto-currencies like Bitcoin and Litecoin.
  2. Utility tokens are “intended to provide access digitally to an application, services or resources available on a distributed ledger and that are accepted only by the issuer of that token to grant access to such application, services or resources available”. They often have a non-financial purpose, for example access to a platform or services such as OmiseGo or OMG (trading, payments) and Filecoin (storage, payments).
  3. Asset referenced tokens have as “main purpose to be used as means of exchange thereby maintaining a stable value by referring to the value of fiat currencies, commodities or crypto-assets, or a combination thereof”. They are aimed to be used as means of payment. Examples include DAI (backed by crypto-currencies) and PAX Gold (backed by gold).
  4. E-money tokens have as “main purpose to be used as a means of exchange thereby maintaining a stable value by being denominated in (units of) a fiat currency”. As such they can also be considered as a subcategory of asset referenced tokens. As they refer to one fiat currency only, they are very much similar to e-money. Examples include USD Tether and Libra (to the extent backed by one currency only).

Apart from this, the draft MiCA Regulation includes a definition of crypto-asset services that includes custody and administration, operation of a trading platform, exchange services, brokerage and placement services, advice and execution of payment transactions, all relating to crypto-assets.

Main elements of draft MiCA Regulation

The draft MiCA Regulation is a sizeable document including 114 (sometimes lengthy) articles and includes rules for the offering and marketing of crypto-assets applicable to all types of crypto-assets and additional rules and restrictions on the issuance of asset-referenced tokens and e-money tokens. Apart from this, the draft MiCA Regulation includes rules on the authorization and operating conditions for crypto-asset service providers as well as rules on prevention of market abuse.

As with almost all EU legislation, further rules will be laid down in delegated and implementing acts. The contents thereof are unknown at present. In addition, also the Annexes 1, 2 and 3 to the draft MiCA Regulation including the requirements for the various whitepapers to be published, are still missing. At this stage it is therefore still impossible to make a full assessment of the impact of the MiCA Regulation when in force. However, based on the general requirements mentioned in the draft MiCA Regulation itself it can be safely concluded that the impact will be considerable (crypto-assets), far-reaching (asset-referenced tokens, crypto-asset services) and severe (e-money tokens).

The core of the draft MiCA Regulation consists of rules and requirements for the offering and issuing of crypto-assets (utility tokens, asset referenced tokens and e-money tokens) and the providing of the various services relating to crypto-assets.


Highlights of the new MiCA regime seem to be that:

  1. a whitepaper must be made public for the offering of crypto-assets (that must be approved by the regulator in case of asset-referenced tokens)
  2. issuers of asset-referenced tokens must be authorized
  3. e-money tokens may only be issued by authorized credit institutions or e-money institutions
  4. providers of services relating to crypto-assets must be authorized.

An overview of the main aspects of the draft MiCA Regulation is presented in this table.

Brexit: it is finally there (but it is still unclear)

At 00:00 hrs on 1 February 2020, Brexit is finally a reality and the United Kingdom is no longer part of the European Union. However, now that the UK Parliament and the EU Parliament ratified the Withdrawal Agreement on 23 and 29 January 2020, there will be no hard (or no deal) Brexit, at least not for the moment.

Transition period

The Withdrawal Agreement provides for a transition period that will end on 31 December 2020. On the basis of the Withdrawal Agreement, basically all EU law will continue to apply to and in the UK during the transition period. This means that until 31 December 2020, little will change in comparison with the period prior to Brexit. One may say that, as long as no permanent deal on transition has been reached, a soft Brexit applies. During 2020 UK financial institutions will continue to have access to the EU as before. The same goes for EU financial institutions and access to the UK.

As a result, the statutory arrangements made by EU and national legislators and regulators with a view to a hard Brexit, do not need to be enacted in 2020. These arrangements may however still be necessary if no agreement is reached between the UK and the EU on their future relationship. In other words, a hard Brexit is still possible, in which case the statutory arrangements may be enacted after all. Whether this will be the case will become clear in the course of 2020 or even thereafter, should the transition period be extended.

Dutch statutory arrangements for investment firms and AIFMs

As indicated in previous Brexit updates, arrangements have already been made in the Netherlands, or are already in place, to accommodate investment firms and AIFMs from the UK when dealing with professional clients or qualified investors within the Netherlands. This is primarily done with a view to protecting Dutch institutional investors, enabling them to continue to deal with UK investment firms and AIFMs. As a result of the transition period, the new Dutch exemption for UK investment firms that was announced earlier will not be enacted for the moment due to the lack of a hard Brexit.

Action required?

Even though the existing EU regime will continue to apply to and in the UK in 2020, the most important conclusion to be drawn is that for the moment a soft Brexit is now truly a fact, but for the moment only for 2020. This means that parties that have postponed their mitigating actions must still take action to address the consequences of Brexit. While the negotiations between the UK and the EU may still result in an agreement on continued access by UK financial institutions to the EU, success should not be taken for granted. Should such negotiatons fail and in the end result in a hard Brexit, measures will have to be taken to secure continued access to (clients in) the EU.

Brexit update

With the postponed Brexit date of 31 October 2019 rapidly approaching, this is a short update of relevant Dutch rules and regulations for the financial services industry to mitigate the negative consequences of a hard Brexit. This update does not cover EU-wide arrangements such as those on clearing and trading at regulated markets.

Coming to the Netherlands

In September the Netherlands Instute of International Relations “Clingendael” has published a database of companies that have moved or are in the process of moving, (part of) their business to the Netherlands with a view to a Brexit. Where the Netherlands Foreign Investment Agency mentioned earlier that in August 2019 some 98 companies had opted for the Netherlands, the “Clingendael” institute now counts 56 companies moving 32 of which are financial sector companies. This group consists of trading venues, boutique trading firms and more traditional financials. No doubt depending on further Brexit developments more financials may follow. If they do, they may however benefit from the following regulations and may avoid moving for the purpose of market access.

UK investment firms

Investment firms domiciled in the UK providing services to professional clients in the Netherlands or dealing on own account in the Netherlands, may benefit from a new exemption from the Dutch licensing requirements for investment firms under MiFID II. Similar to the existing exemption for investment firms domiciled in the U.S., Switzerland and Australia, also UK investment firms may benefit from this exemption but only in case of a hard Brexit. In case of a deal on Brexit, this exemption will not enter into force. This exemption may be of a temporary nature only.

To benefit from this exemption the investment firm involved may only provide investment services to professional clients (such as Dutch institutional investors), must be subject to supervision by a competent supervisor (the FCA), and must register itself with the Netherlands Authority for the Financial Markets (AFM). This registration is of an administrative nature and can already be made prior to and conditional upon a hard Brexit. A registration fee of € 4,400 will be charged by the AFM in case registration will actually take place upon a hard Brexit.

A limited number of ongoing requirements applicable to Dutch licensed investment firms will apply upon registration. These requirements should not be burdensome for UK investment firms nowadays meeting the MiFID II requirements.


AIFMs domiciled in the UK may benefit from the existing Dutch private placement regime under AIFMD in case of a hard Brexit. In order to do so, marketing must be limited to qualified investors (such as Dutch institutional investors), the competent regulator (the FCA) has to confirm that it will be able to meet the obligations under the cooperation agreement with the AFM as recently agreed upon, and registration with the AFM has to take place by the AIFM. This registration is of an administrative nature and is free of charge.

Further to AIFMD, a limited number of ongoing requirements applicable to AIFMs will apply upon registration. These requirements should not be burdensome for UK AIFMs nowadays meeting the AIFMD requirements.

Other financial services sectors

Other than the EU-wide arrangements to mitigate the negative effects of a hard Brexit, there are no particular Dutch mitigation measures for other financial services sectors. As a result, other types of UK financial institutions will still have to take into account what part of their business in the Netherlands may be impacted by a hard Brexit. As a positive note it can be mentioned that in the meantime the Dutch regulators DNB and AFM have ample experience in handling authorization requests by UK financial institutions to set up a regulated Dutch business. As a result, while authorization remains to be a timeconsuming and expensive process, the benefit of an application at this stage is a smoother process than the initial applicants have gone through.