Using ManCo Passporting for Marketing Third-Party Funds

8th December 2022

As the regulatory landscape continues to evolve, more and more asset managers are using ManCo passporting to market third-party funds, not only for managing funds as a ManCo on a cross-border basis. In principle, you must register individual investment funds for marketing in each jurisdiction. But if you wish to market third-party investment funds that are not managed by you as a Management Company, it is worth it to review whether this activity is covered under an ancillary service of your management company license

The regulatory difficulty is that the UCITS Directive does not include the reception and transmission of orders as a permitted ancillary service – in contrast to AIFMD. But many EU Member States have decided to allow management companies to perform additional ancillary or non-core services, such as (i) investment advice, (ii) reception and transmission of orders, or even explicitly, (iii) the distribution of third-party investment funds. These non-core services might or might not depend on an additional license for the management of portfolios of investments, which needs to be assessed for each individual jurisdiction.

Some EU Member States even interpret the marketing of foreign funds as being part of the UCITS ManCo license itself.

The passporting process and the requirements for the notification to your Home State regulator depends on the chosen mechanism, if it is performed by way of cross-border provision of services or by the establishment of a branch

In summary, you must consider the following points when you intend to passport the marketing of third-party funds to other EU Member States:

  • Do you wish to passport a UCITS or AIFMD licence for the purpose of marketing third-party funds?
  • What is your home state jurisdiction? Depending on the jurisdiction, the marketing of third-party funds can be considered a part of the core ManCo license or an ancillary service.
  • What is the host state jurisdiction?
  • If the activity is part of the ancillary service, do you need an additional top-up permission for the management of portfolios of investments?
  • Depending on your choice to establish a branch or to passport on a freedom of services basis, the passporting notification requires individual adjustment.

If you have any questions or require support, the Zeidler team is here to help. Our global team of professionals remains up to date on the latest legal, regulatory and compliance changes affecting the asset management industry.

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Serena Goldberg