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Increasingly, Alternative Investment Fund Managers (AIFMs) and Asset Managers are fundraising outside their home country to access pools of institutional capital from leading investors in foreign jurisdictions seeking unique sources of alpha. A vital element of that process is compliance. And when starting out with cross-border fund & financial services marketing compliance, there are key elements you need to know.

Here, in the first blog in our new SRMO Blog & News section, we set out our 5 key tips: What you need to know about cross-border marketing compliance when AIFMs and Asset Managers make their first forays into cross-border marketing of funds and financial services outside their home jurisdiction.

For those more “seasoned cross-border fundraisers”, this initial blog may seem a bit simplistic, but trust us, we’ve heard these questions before in nearly two decades of client advisory. It’s also a prudent approach to reconfirm the basic marketing compliance principles which are so essential to cross-border business development.

5 key tips for cross-border marketing compliance

1. There are rules. Marketing Financial Products and the Provision of Financial Services cross-border into overseas jurisdictions constitutes a regulated activity. This means that marketers and financial service providers must comply with the local jurisdiction’s rules on the promotion of funds and provision of financial services, including solicitation to exempt categories of investors (non-retail clients). We have seen instances of some industry players who don’t realise there are country specific rules on financial product and services promotion, believing there are “blanket waivers” to compliance with cross-border marketing rules.
2. Each country’s rules are different. Each country’s fund and financial service solicitation rules are different – both from your home jurisdiction and from one another’s regulations. With cross-border marketing, it is human nature to look abroad wearing the regulatory glasses of one’s own jurisdiction. (“If I can legally solicit in my home jurisdiction, surely my home country’s rules/permissions are the same rules in foreign jurisdictions.”) In region EU/EEA, country rules are harmonised but there are still country specific differences between EU/EEA countries even within EU Directives.
3. Check country rules before cross-border marketing. We advise clients not to make cross-border outreach or conduct financial product or service marketing in any country unless they have confirmed they can legally do so. Generally speaking,  marketing compliance checks per country are two-track:
   • Fund Registration: Do we need to register our fund in the jurisdiction, make any initial filings and/or can we operate under an exemption from prospectus registration?  and
   • License Registration: Do we need to register for a license to conduct the solicitation activity and/or provide financial services in the jurisdiction or can we operate under licensing exemptions?

Each country’s rules must be checked individually: Some countries apply conduct of business rules or permit fund pre-marketing, etc.

4. Allocate a compliance budget for cross-border marketing. To investigate country marketing regulations can be time-consuming and costly as well as overwhelming in the depth of requirements. Allocation of a compliance budget to investigate local country marketing regulations is a pre-emptive investment to prevent “unwelcome surprises” (that is, distribution risks).
5. Mitigate your distribution risk. Compliance with local regulations for cross-border fundraising is good business and good compliance practice.  Investment in a cross-border marketing compliance platform ensures that the AIFM/Asset Manager’s 5 key cross-border distribution risks are mitigated:
   • Sanctions risk
   • Litigation risk
   • Investor rescission rights risk
   • Reputation risk
   • Business franchise risk

See our blog post: 5-Key Distribution Risks for cross-border marketing

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