New CSSF Circular 22/795 on marketing communications for cross-border distribution of funds

​The CSSF published on 31 January 2022 a Circular¹ in the context of cross-border distribution of funds regarding the application of the ESMA Guidelines² on marketing communications (the “Guidelines") in connection with the CBDF Regulation³.

In this Circular, the CSSF announced that it has integrated the Guidelines into its administrative practices and regulatory approach, and gave precisions regarding their implementation in Luxembourg.

They establish notably: common principles on the identification as such of marketing communications; the equally prominent manner in which must be described the risks and rewards of purchasing units or shares of an AIF or units of a UCITS; and the fair, clear and not-misleading character of marketing communications, taking into account their on-line aspects (cf., “Guidelines key points" below).

CSSF Circular 22/795

Scope

The Circular applies to  UCITS ManCos, self-managed UCITS investment companies, authorised AIFMs, and internally managed authorised AIFs, as well as managers of EuVECAs/EuSEFs (within the meaning of the EuVECA/EuSEF Regulations) (“IFMs"). As a result, registered AIFMs as well as non-EU AIFMs are notably excluded from the scope of the Circular.

Self-assessment of marketing communications by IFMs

The CSSF considers that it is the duty of the relevant IFMs to assess, based on the Guidelines, whether or not a certain message or communication addressed to (potential) investors qualifies as a “marketing communication" (cf., “Guidelines key points" below).

Information to be provided by IFMs on marketing communications and verification by the CSSF

The CSSF calls for the relevant IFMs to provide it with information regarding marketing communications and states that it will conduct testing to verify their compliance with the applicable requirements under Article 4 of the CBDF Regulation and the Guidelines.

Further information regarding notably, the practical and/or technical aspects (including frequency, formats, channel of submission) of the implementation of the above collection of information will be communicated by  the CSSF by means of additional Annexes to the Circular and supplemented by a FAQ.

Applicability

The Circular applies as from 2 February 2022 (same date of application as the Guidelines).

Guidelines key points

What is a marketing communication?

The Guidelines do not define the concept of marketing communication but instead provide a non-exhaustive list of positive and negative examples, which are briefly summarized below:

Examples of marketing communications:

• All messages advertising for a UCITS or an AIF, regardless of the medium, including, but not limited to, paper printed documents or information made available in electronic format, press articles, advertisements, documents made available on the internet or factsheets.
• Messages broadcasted on any social media platform, when such messages refer to any characteristics of a UCITS or an AIF, including the name of the UCITS or the AIF.
• Marketing material addressed individually to (potential) investors, as well as documents or presentations made available by an IFM to the public on its website or in any other places.
• Communications advertising a UCITS or an AIF addressed to (potential) investors located in the home Member State of the fund manager or in a host Member State.
• Communications by a third party and used by an IFM for marketing purposes. 

Examples of documents that should not be considered as marketing communications:

• Legal and regulatory documents/information of a fund, such as the prospectus/PPM or information to be disclosed under Article 23 AIFMD, Article 13 of EuVECA Regulation or Article 14 of EuSEF Regulation, the KIID and/or KID, financial reports, articles of association, limited partnership agreements or similar documents required to legally establish a fund.
• Corporate communications broadcast by the fund manager describing its activities or some recent market developments, which do not refer to a specific/group of UCITS or AIF.
• Short messages broadcast on-line (notably on social media platforms), which only include a link to a webpage where a marketing communication is available, but which do not contain any information on a specific/group of UCITS or AIF.
• Information or communication issued in the context of pre-marketing under AIFMD.

Rules

The Guidelines provide several rules applicable to marketing communications and the type of information they contain and some key elements are summarized below:

Prior approval: a publication of a marketing communication referencing an AIF/UCITS can only take place once the relevant marketing authorizations or notifications required have been cleared.

Identification of the marketing nature of the communication: the marketing information shall clearly (i) state that it has been identified as such, (ii) state that it has a purely marketing purpose and (iii) disclose the terms “marketing communication". It shall also include reference to the documents of the AIF/UCITS foreseen by law for full details on the AIF/UCITS.

Suitability of information to target investors: in addition to be fair, clear and not misleading, the information disclosed should be drafted so as to be understood by the category of investors to which it is addressed.

Consistency with other documents: the information should be consistent with the legal and regulatory documents of the relevant fund and the information disclosed on the website of the IFM. This requirement is applicable to, inter alia, the disclosure of the investment policy, recommended holding period, risks and rewards, costs, past and expected future performance, and sustainability-related aspects of the investment.

Description of the features of the investment: if included, it must be kept up to date; be proportionate in its description to the type of communication but always with sufficient information for the target investors to understand the key elements of those features without excessive cross-referencing to the relevant fund documents. Furthermore, statements are to be neutral, balanced and based on objective and reliable sources that shall be provided.

Information on risks and rewards: if any benefit information is included, risks must also be directly included and the description and display of both should be done, accurately, clearly, fairly, equally (e.g., same length, font, etc) and uniformly (e.g., side by side or consecutively). Risks should also be classified as per the KID or the KIID and reference be made to the relevant fund documents and the location of full information on risks provided.

Information on costs: if included, explanations should allow investors to understand the overall impact of costs on the amount of their investment and on the expected returns. The use of a currency other than that of the investor's home state shall be disclosed together with the consequences linked to it.

Information on past and expected future performances: if included, it should be consistent with other relevant disclosure documents/information on it, be sufficiently detailed (notably regarding the period of time to be considered) and justified, while not being the main information communicated. A certain methodology should be followed in case of simulated past performance for recent funds without such data available. Information on expected future performance if included, should be sufficiently reasonable, objectively justified, adapted to the relevant fund and contain specific disclaimers and statements.​

Information on sustainability-related aspects: information on the sustainability-related aspects, within the meaning of SFDR⁴, should not outweigh the extent to which the investment strategy of the product integrates sustainability-related characteristics or objectives. It shall furthermore indicate that the decision to invest should take into account all the characteristics or objectives of the promoted fund as described in the relevant documents including financial and ESG aspects.

Footnotes:

¹ Circular CSSF 22/795: Application of the Guidelines of the European Securities and Market Authority on marketing communications (ESMA34- 45-1272) under Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014.
²  ESMA Guidelines on marketing communications under the Regulation on cross-border distribution of funds. Ref: ESMA34-45-1272. Published on 02/08/2021.
³ CBDF Regulation: Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014.
⁴ SFDR: Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, as amended.