Spotlight on AIFMD II and Distribution: What Has (and Has Not) Changed

Article 20(6a) of AIFMD II introduces an explicit derogation from the delegation regime for the marketing function referred to in Annex I, point 2(b), where that function is performed by MiFID II- or IDD-regulated distributors acting on their own behalf. In such cases, the performance of marketing activity is, as a matter of law, not to be treated as a delegation under Article 20, irrespective of the existence or form of any distribution agreement between the AIFM and the distributor.

This clarification provides welcome legal certainty that distribution activity carried out within a separate regulatory perimeter does not, in itself, constitute a delegated AIFM function. At the same time, it sharpens the focus on the scope of services performed under distribution arrangements. While a marketing activity itself falls outside the delegation framework where the conditions of Article 20(6a) are met, the derogation does not extend to arrangements that go beyond marketing and involve the performance of functions forming part of the AIFM’s operational or control framework.

For many AIFMs, this does not necessitate a wholesale change in distribution model. It does, however, require a careful, substance-based assessment of existing distribution arrangements in order to determine whether their scope is confined to marketing activity within the meaning of Article 20(6a), or whether additional functions are being performed that remain subject to the AIFMD delegation regime.

Why distribution matters under AIFMD II

Historically, uncertainty existed as to whether marketing activities performed by third parties could be treated as a delegated function under Article 20 of AIFMD, particularly where the AIFM exercised significant influence over how funds were marketed.

AIFMD II attempts to address this uncertainty directly by introducing a new carve-out for distribution activity performed by independent, regulated distributors.

The new rule: Article 20(6a) AIFMD II

Under AIFMD II, marketing of an AIF performed by one or more distributors:

• • acting on their own behalf, and
  • regulated under MiFID II or the Insurance Distribution Directive (IDD)

is not considered a delegation, regardless of any distribution agreement in place.

This is a significant clarification because it confirms that distribution, as such, is outside the AIFMD delegation regime provided that the distributor is genuinely independent.

What has not changed

On a general note, AIFMD II does not:

• prohibit the use of third-party distributors;
• remove or amend MiFID II product governance obligations;
• prevent AIFMs from defining a proposed target market; or
• require AIFMs to adopt “platform-only” distribution models.

Nor does it automatically invalidate existing distribution agreements.

The core issue: independence vs control

Recital 10 of AIFMD II further underscore the decisive question under Article 20(6a), which is not whether a distribution agreement exists, but how much control the AIFM exercises over marketing activity.

Independence can be preserved where the distributor:

• acts in its own name and on its own behalf;
• determines how, when and to whom the AIF is marketed;
• performs suitability / appropriateness under its own regulatory obligations;
• can decide not to distribute or to de-prioritise the fund, meaning the distributor is under no obligation to sell the fund.

Independence is at risk where the AIFM:

• appoints the distributor to oversee the entire distribution function, not just for sales activity;
• imposes finite marketing strategies, limiting the distributor’s discretion and/or ability to not distribute or to de-prioritise the fund;
• requires approval of marketing materials beyond legal accuracy;
• controls client targeting or sales execution.

Therefore, where the analysis becomes more nuanced is in the level of control exercised by the AIFM and in whether the scope of the arrangement extends beyond pure distribution activity into functions of oversight, direction or control that would ordinarily sit with the AIFM. While the mere permission to distribute an AIF, or the setting of product-level parameters consistent with MiFID II product governance, does not in itself amount to delegation, different considerations arise where a distributor is positioned as performing marketing activity as part of the AIFM’s operational framework. Many traditional distribution agreements go well beyond product governance and legal accuracy, giving the AIFM a decisive role in how, where and to whom a fund is marketed. Mandatory geographies, detailed marketing approvals, sales direction or minimum effort obligations may be commercially familiar, but under AIFMD II they increasingly resemble the outsourcing of marketing control functions rather than independent distribution carried out on the distributor’s own behalf.

Target market rules do not undermine independence

AIFMD II must be read together with MiFID II product governance rules:

• AIFMs, as manufacturers, must define a proposed target market.
• Distributors should distribute consistently with that proposed target market and report to the AIFM when distribution occurred ouside the proposed target market

That obligation sits comfortably within the existing manufacturer–distributor framework and, on its own, does not change the nature of the relationship. Difficult questions only arise where target market definitions are used in practice to control sales activity or to determine individual client outcomes.

What AIFMs should do now

From an AIFMD II perspective, the appropriate response is a considered assessment of distribution arrangements by reference to their substantive characteristics rather than their contractual form.

This assessment typically involves examining whether, taken as a whole, an arrangement reflects independent distribution activity or whether elements of controlled marketing are present, including the way in which geographic scope is defined, the purpose and scope of any marketing material approvals, the extent of sales direction or activity reporting, the existence of minimum effort or target-style obligations and if the arrangement includes oversight of the entire distribution function at a control level.

Where such features are reviewed in substance, any resulting adjustments tend to be incremental and focused on ensuring that contractual documentation accurately reflects the underlying regulatory character of the relationship, rather than introducing structural change. In parallel, it is prudent for AIFMs to articulate and retain a clear rationale for the classification of each distribution model, setting out why the relevant activities are treated as falling within or outside the AIFMD delegation framework in light of Article 20(6a).

Note that AIFMD II does not mandate a single compliant distribution model. Rather, it preserves the distinction between independent intermediation and the operational outsourcing of marketing activities. In doing so, it affords protection to genuinely independent distribution arrangements while constraining models that involve a degree of AIFM control over marketing execution. For most AIFMs, the practical consequence is therefore unlikely to be wholesale change, but instead a more targeted exercise focused on clarification, classification and documentation of existing distribution arrangements.

Conclusion

AIFMD II provides welcome clarity: independent distribution is not delegation. However, it also means that distribution agreements drafted around tight AIFM control may no longer sit comfortably within the new framework.

The question for AIFMs is therefore not whether the marketing of their funds is carried out through third-party distributors, nor whether a distribution agreement exists, but whether the scope of those arrangements is confined to marketing activity carried out on the distributor’s own behalf within the MiFID II or IDD framework, or whether it extends into functions that form part of the AIFM’s operational responsibilities and therefore remain subject to the delegation regime.

If you have questions on how AIFMD II impacts your distribution model, or would like a substance-based review of existing arrangements in light of Article 20(6a), please contact our legal team.