Good email management could ward off claims for civil law damages, tax consequences and even criminal penalties in connection with the Alternative Investment Fund Managers Directive.

As
every compliance officer knows, failure to comply with the European
Union's recent Alternative Investment Fund Managers Directive could
lead eventually to claims for civil law damages, tax consequences
and, in exceptional cases, criminal penalties.

The
directive contains complex regulations governing marketing and email
marketing carried out by fund managers with interests in alternative
investment funds (AIFs). In the UK, US and continental Europe these
regulations will operate alongside and sometimes overlap with those
of local jurisdictions regarding financial promotions, so it is
essential that you take on board and understand the implications for
you. 

No
guidance has been issued by the FCA (Financial Conduct Authority) or
ESMA (the European Securities and Markets Authority) on the meaning
of 'marketing' and 'email marketing'. However, some useful guidance
can be found in the FCA's final policy statement and 'perimeter
guidance', which confirms the following: 

Passive marketing 

The
AIFMD does not restrict professional investors who wish to invest in
AIFs on their own initiative. If the offer or placement is made at
the initiative of the investor, in other words if there is 'reverse
solicitation' or passive marketing, this activity is not to be
classified as marketing. Confirmation from the investor that the
offering or placement was made on his own initiative should normally
be enough to demonstrate this, as long as the confirmation is
obtained before the offer or placement takes place. 'Email marketing'
will not be included in 'passive marketing' as it has by its nature
an element of coercion. 

Draft documents 

Although
the FCA believes that the sending of draft documents (including
promotional presentations or 'pathfinder' versions of private
placement memoranda) is not marketing, it has 'held fire' on this
subject until the EU provides guidance. This only affects draft
documents and does not include approved documents such as factsheets,
weekly and monthly net asset values (NAVs) or promotional material. 

Listing 

The
listing of an AIF is not in itself considered marketing, but the
activity undertaken that leads to a listing may be.

Invitation to offer

An
invitation to an investor to make an offer to subscribe for the
investment will be treated as an offer. This includes indirect
offers, situations in which the manager distributes units of or
shares in or information about an AIF through an intermediary or
directly or via email marketing. 

Permission and
confirmation

Fund
managers need to be fully compliant with the AIFMD to manage and
market AIFs. What
this means to asset managers and hedge fund managers is that for any
email activity the recipients - which could be family offices,
sophisticated investors or pension funds - must have 'opted in' to
the mailing list and must have given express permission and
confirmation to receive documents. These documents may include
information related to offers and placements. Your confirmation data
also needs to be auditable - this means that you have to keep email
records of these conversations. If someone says 'yes' to an offer,
the evidence must be there for the regulators to see.

Paul Das is a director at ProFundCom, which has set up
an AIFMD Manager on its AppStore. He can be reached on +44 (0)20 7060 2146.