META welcomes the opportunity to contribute to the public Capital Markets Union debate
META (through its daughter company META Ventures) has over 20 years of experience in managing and implementing early stage funds, currently managing 8 funds in Italy, Slovenia and Poland. Based on this experience META believes that developing and speeding up the use of financial instruments and in particular equity instruments is crucial to foster the competiveness of European regions and countries.
META also believes that Cross-border investment funds have an important role to play in creating a deeper single market for capital (CMU) that will strengthen Europe’s economy and encourage investment in all 28 Member States.
- Question 1 – Are you aware of member state interpretations of marketing that you consider to go unreasonably beyond the definition of marketing in AIFMD?
META is aware of different interpretations of marketing and firmly considers those discrepancies to be a significant market entry barrier. Accordingly, META suggests that at EU level should be further developed a common definition of what is marketing and related standards as to the scope of marketing activities.
- Question 2– Are you aware of any of the practices described above having had a material impact upon the cross-border distribution of investment funds?
Different interpretations cause significant delays, legal uncertainty and additional costs, as customized legal advice per member state is usually necessary. Moreover, different rules that apply in each jurisdiction leading to a bureaucratic and slowing-down of the process.
- Question 3 – Have you seen any examples of Member States applying stricter marketing requirements for funds marketed cross-border into their domestic market than funds marketed by managers based in that Member State?
AIFMD allows member states to impose additional requirements for the distribution of AIFs to retail investors. Accordingly, when targeting local retail investors, a number of additional requirements can be found in several jurisdictions, reporting to a number of local authorities, payment of additional regulatory fees creating important delays and costs. Therefore, it needs to be ensured that these requirements have the added value for the end-investor that justifies the overall additional costs and delays.
- Question 4 – Do differing national levels of, and bases for, regulatory fees hinder the development of the cross–border distribution of funds?
Yes, especially the different bases for regulatory fees and the payment process. The regulatory fees for the passporting of AIFs required by national regulators across the EU still differ widely, which does not foster the cross-border marketing within the single market.
- Question 5 – What are the main barriers to cross-border marketing in relation to administrative arrangements and obligations in Member States? Please provide tangible examples of where you consider these to be excessive:
The requirements to appoint local facilities in the host member state are a burden to management companies and AIFMs given that:
Time to market: the process of negotiation of contracts with local service providers will be slowed down, with potential loss of opportunities identified.
Time investment: the management company or AIFM and its service providers are required to invest time to:
– Understand the local facilities requirements;
– Select a local facilities agent;
– Negotiate and sign contracts and service level agreements;
– Perform initial due diligence prior to accepting the agreement;
– Perform ongoing due diligence on at least an annual basis;
– Monitor the service provider on an ongoing basis;
Costs: the cost of local service providers relates to:
– Set up: compliance, legal, conducting persons at the levels of the Management Company or AIFM, depositary administrator/transfer agent.
– Ongoing: distribution market of qualified professionals at the management company and the relevant service provider.
– Cost of the service itself: reducing the member states’ local agent requirements would offer significant cost savings to management companies, whose funds are marketed on a cross-border basis.
- Question 6 –Do you consider that requirements imposed by host Member States, in relation to administrative arrangements, to be stricter for foreign EU funds than for to domestic funds? Question 6.2a – Please explain your reply.
The administrative arrangement imposed to foreign EU funds, represent a significant burden when applied on a cross-border basis. The requirement to appoint local facilities in the territory of the host member state are disproportionate for the cross-border distribution of investment funds; they represent a burden for all asset managers with limited tangible added value for investors.
- Question 7–Have you experienced unjustified delay in the notification process before being able to market your AIFs in another Member State?
The notification letter forwarded by the home National Competent Authority to the host NCA is very detailed not only in the case of initial registration, but also in the case of modifications. Any amendment of the offering documentation, material or not, has to be fully reviewed and this leads to a review of the notification letter that is an expensive and extremely time consuming process.
- Question 8 – Please describe the difficulties, including whether they relate to discrimination against UCITS or AIF (including ELTIF, EuVECA or EuSEF) sold on a cross-border, and provide examples. Please cite the relevant provisions of the legislation concerned.
National tax reporting that need to be prepared by investment funds for their investors (e.g. Austria, Belgium, Finland, Germany, Italy, Sweden and UK) are based on national legislative requirements, even if they normally share the common aim of facilitating investor compliance with local tax law. Such tax reporting obligations are not harmonized across Europe and therefore represent additional complexity and costs for investment funds that distribute their shares cross-border. This brings additional costs and efforts of coordination. In case of target funds in the fund to be reported the challenge, effort and cost situation is a multiple one.
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