I. Regulatory framework of the ESMA Guidelines
On February 2, 2022, the ESMA Guidelines on marketing communications under the Regulation on cross-border distribution of funds (Document 34-45-1272 of August 2, 2021 – hereinafter, the “Guidelines”) will enter into force throughout the EU.
The Guidelines provide official interpretation/guidance on the rules on the marketing of collective investment schemes of the Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings (the “Regulation”); at its turn, the Regulation contains rules implementing the Directive (EU) 2019/1160 of the European Parliament and the Council of 20 June 2019 (known as “Cross Border of Distribution of Funds Directive” or “CBDF”) on the simplification of the cross-border distribution of collective investment schemes, including UCITS and AIFs.
II. The impact of the Guidelines on the Italian funds marketing ecosystem and on the attitude of CONSOB
It is expected that the Guidelines will not have a material effect on the Italian funds marketing ecosystem given the similarities between the national and the European sets of rules.
As to the duties of submission of the ads to the regulator, Italy is exercising the option, provided for by article 7(1) of the Regulation, to require the transmission of the marketing materials to CONSOB before their dissemination. However, consistently with the previous system, such obligation will continue to apply only to the materials addressed to retail investors.
The main topics on which CONSOB will focus its supervision, also in light of some changes introduced the Guidelines, will likely be:
• information on past performance, and reference periods;
• impact of the Guidelines and the Regulation on specific requirements of the existing Italian rules on advertisements;
• formalities for the submission of the marketing materials to CONSOB; and
• disclosure required under article 4(3) of the Regulation.
II.2 Information on past performance, and reference periods
With regard to the reference periods used in the information on performance, CONSOB will strictly follow Para. 44 of the Guidelines, i.e., ten or five years (according on whether the fund has a KIIID or not), or the whole period of offering of the fund; in addition the performance should in any case refer to periods of at least twelve months. As an exception to the above minimum period of twelve months, the Guidelines allow infra-annual performance only for the periods as of the end of the most recent quarter preceding the dissemination of the material.
In this context, CONSOB will consider as “exhaustive” the list of reference periods in Para. 44 of the Guidelines. Thus, performance referred to, e.g., one-month periods and to “year-to-date” will not be allowed (unless the “year-to-date” is the end of the most recent quarter). In relation to this point, CONSOB may sound out the attitude of the other European regulators in order to have, if the case may be, an express position of the ESMA on the infra-annual performance.
It should be noted that an existing regulation of CONSOB, presently not affected by the Guidelines (Regulation no 11971 of 1999 on Issuers of Financial Instruments, as amended, hereinafter, “RE”) provides that the performance should be specified “net of taxes”, or when this is not possible, this circumstance should be specified.
So far, CONSOB didn’t clarify whether the “taxes” should be those applicable at fund’s level – in which case the provision of the RE would be without effect where a fund is tax exempt – or at investors’ level. In this second case, the calculation of the net return for an Italian investor after local taxation would be a very difficult exercise (capital gain taxes may be withheld at different rates within the same sub-fund!) and the only solution would be a disclaimer noting that return is gross of taxation at investors’ level. We pointed out verbally with CONSOB that the above provision of the RE should be referred to the taxation at fund’s level, also in light of some parts of the Guidelines (see e.g., Para. 56) stating that performance will also be subject to the personal taxation of the investor.
Finally, CONSOB emphasized the importance of Section 5 of the Guidelines in relation to the description of the risks and the rewards in an equally prominent manner.
II.3 Impact of the Guidelines and the Regulation on specific requirements of the existing Italian rules on advertisements
When declaring its adhesion to the Guidelines in August 2021, CONSOB expressly stated that the Guidelines supersede the existing local guidelines on the drafting of marketing materials, issued by CONSOB in April 2001.
There are no material differences between the Guidelines and the corresponding Italian document of 2001; what’s more, this document also included the requirement of specifying the performance as of the end of the last quarter before the dissemination of the material.
As to the RE, the Guidelines will have limited impact on it – see previous paragraph on the specification of performance net of taxation. For completeness, the RE provides for a warning to read the prospectus before the investment which is very similar, but not the same, as the wording in Para. 7 of the Italian version of the Guidelines. We informed CONSOB on this circumstance, and it is expected that both legends will be accepted, at least before the phrasing of the RE will be amended for sake of consistency with the Guidelines. Otherwise, the disclaimer in the RE on the performance specification is exactly the same as the one in Para. 47 of the Guidelines.
II.4 Formalities for the submission of the marketing materials to CONSOB
As already pointed out, the marketing materials addressed to retail investors will continue to be submitted to CONSOB before their dissemination.
For the purpose of this transmission, CONSOB require the use of the Italian “PEC” (acronym for “Posta Elettronica Certificata”) certified e-mails, which is generally available to any entity domiciled in Italy. Ad-hoc waivers to the use of PEC may be granted to foreign entities.
In general, the use of hyperlinks where CONSOB may inspect the materials is not allowed, to the extent the contents of such materials may be amended by the applicant after the transmission of the hyperlink to CONSOB for submission purposes.
However, for materials like videos which are very heavy in terms of bytes, CONSOB allows the use of hyperlinks. It is also expected that CONSOB will authorise a general use of the hyperlinks (not only for heavy materials), provided that only CONSOB may access the relevant website and/or that the materials displayed therein may no longer be modified.
CONSOB will review in the next few months the procedures for the submission of marketing materials in light of the above considerations.
II.5 Disclosure required under article 4(3) of the Regulation
CONSOB pointed out that they expect compliance with the provisions of article 4(3) of the Regulation, according to which the ads that contain specific information about a fund must specify:
“where, how and in which language investors or potential investors can obtain a summary of investor rights and shall provide a hyperlink to such a summary, which shall include, as appropriate, information on access to collective redress mechanisms at Union and national level in the event of litigation”.
CONSOB also clarified that the above should be a complete information, whereas an information that only deals on the submission of complaints and their processing is not sufficient for the purpose of the compliance with that requirement.