“Pre-Marketing” for investment funds: Not without the Bafin

If a fund provider wants to approach potential investors in order to test their interest in a fund before it is launched, the Bafin must be informed immediately – for example by the responsible liability umbrella. Failure to comply could result in a hefty fine.

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The times when the advance approach to potential fund investors in Germany was largely unregulated are now over. Since August 2, 2021, not only the term “pre-marketing” has been defined in Europe as part of the fund location law; there are also uniform rules that must be observed by the fund houses.

The EU understands pre-marketing as “the direct or indirect provision of information about investment strategies or investment concepts to potential professional investors resident in the EU in order to test their interest in a fund that has not yet been launched or for which it is still available in the respective member state there is no sales notice”.

Liability umbrella must inform the Bafin

From now on, the fund house or the associated liability umbrella must notify Bafin two weeks before the start of pre-marketing that potential investors are being approached. Failure to register with the financial supervisory authority is considered an administrative offense that can be punished with a fine of up to €200,000 or twice the economic benefit derived from the violation.

In the past, smaller providers in particular had often offered their niche funds on the market with the 34f approval and had previously carried out pre-marketing for advertising purposes. In the meantime, these companies must also apply for WpIG approval – or use a liability umbrella such as CONCEDUS, which coordinates with the financial supervisory authority.

The notification to the Bafin as part of the pre-marketing includes naming the EU countries in which the pre-marketing will take place and the envisaged period. In addition, the fund manager must describe what the preliminary approach will look like and what investment strategy is being pursued for the relevant fund.

More information can be found here.