Marketing UCITS in Europe via Social Media?
The Cross Border Distribution of Investment Funds Directive comes with a set of measures aimed at making the marketing of UCITS in Europe less burdensome for [smaller] fund managers. Whilst some of the measures are directly impacting existing dynamics applicable to UCITS marketing in Europe (see article on local facilities agents here), some other measures attempt instead to tackle from a different perspective the hurdles to more integrated European capital markets.
It is against this backdrop that, further a consultation, ESMA just released its final report on the Guidelines on marketing communications. With these guidelines, ESMA essentially intends to capture the different types of communications that, within the context of cross border fund distribution, can be considered marketing. Moreover, the guidelines are a very useful exercise where ESMA takes a look at some practices developed during the era of digitalisation, like using social media for marketing communications, with a view to introduce a new etiquette for marketing fund products using social media and any other digital platform channel.
Get in touch here with your contacts at Veneziano & Partners to see how we can help with UCITS marketing in Europe.
What is deemed UCITS Marketing Communication
The recently issued final ESMA Guidelines on marketing communications take into account the feedback provided by market participants on the first round of consultation on the guidelines. Stakeholders and market participants expressed the preference to adjust the scope of the guidelines in order to have both a positive and a negative list of documents and other materials that would fit the definition of marketing material under the Guidelines. Accordingly, article one of the ESMA guidelines on marketing communications considers marketing communications the following:
a) All messages advertising for a UCITS or an AIF, regardless of the medium, including paper printed documents or information made available in electronic format, press articles, press releases, interviews, advertisements, documents made available on the internet, as well as webpages, video presentations, live presentations, radio messages or factsheets.
b) Messages broadcasted on any social media platform, when such messages refer to any characteristics of a UCITS or an AIF, including the name of the UCITS or the AIF.
c) Marketing material addressed individually to investors or potential investors, as well as documents or presentations made available by a UCITS management company, an AIFM, a EuVECA manager or a EuSEF manager to the public on its website or in any other places (fund manager’s registered office, distributor’s office, etc.).
d) Communications advertising a UCITS or an AIF addressed to investors or potential investors located both in the home Member State of the fund manager or in a host Member State.
e) Communications by a third party and used by a UCITS management company, an AIFM, a EuVECA manager, or a EuSEF manager for marketing purposes.
…and what is not
At the same time, legal and regulatory documents and information about a fund, such as the prospectus or the offering memorandum, KIIDs or PRIIPs KIDs, as well as financial reports, trust deeds or by-laws are excluded from the list of the documents that should be considered marketing communications. The same applies to corporate communications broadcast by the fund manager describing its activities as well as recent market developments when these do not refer specifically to a fund or group of funds. Lastly, short messages broadcast on-line containing the link to a webpage where the marketing communication is available, as well as information issued in the context of premarketing are excluded from the list of marketing communications.
Hashtags and Disclaimers – social media etiquette for UCITS marketing in Europe
The ESMA Guidelines on marketing communications contain also a very useful definition of social media. In an era of accelerated digitalisation, we welcome this approach adopted by ESMA to look at the digital aspects of UCITS marketing in Europe.
For the purpose of the ESMA Guidelines on marketing communications, the term social media should be understood as any technologies which enable social interaction and the creation of collaborative content online, such as blogs and social networks (Twitter, LinkedIn, Facebook, Instagram, Tiktok, Youtube, Discord etc.) or discussion forums, accessible by any means (in particular electronic means, via a computer or mobile applications for example). In other words, tweets and Linkedin posts will fall under the category of UCITS marketing communication going forward.
Also, the ESMA Guidelines on marketing communications stress the importance that any marketing communication is clearly identifiable as such. Accordingly, any marketing communication shall include sufficient information to make extremely clear that i) it has a mere marketing purpose; ii) it is not contractually binding nor an information document required by the law; iii) it is not sufficient to take an investment decision.
To put these requirements into context, ESMA Guidelines on marketing communications will require that in any marketing communication a prominent disclosure of the terms marketing communication (even more so when preceded by the # symbol for on-line communications) is adopted, so as to make it easier for any person, either looking or listening to a communication, can identify it as such. ESMA goes further and prescribes also a specific format for the disclaimer to be adopted for marketing communication. The disclaimer, amongst other things, shall mention that legal documentation for the specific fund exists and is available at a specific website and that the investor shall take into account that specific legal documentation when deciding to make an investment. The disclaimer should be clearly and prominently displayed in the marketing communication. The clarity of the disclaimer is then dependent on the specific type of communication. Whilst for Linkedin posts it is easier to ascertain that a disclaimer is clear, for video content, this is slightly more complex. ESMA suggest that a disclaimer is not clear and prominent if it is placed only at the end of the video and requires that the disclaimer is present throughout the entire footage. However, should the format of the communication not fit the disclaimer as prescribed in the guidelines, the terms marketing communication should nevertheless be clearly stated in the communication. Slightly more nuanced is the requirement of a disclaimer for videos. In this case, the disclaimer should be embedded in the entire video and not only displayed at the end, for instance.
Conclusions
To sum it all up, whilst the aim of the ESMA Guidelines on marketing communications is not as ambitious as to establish a European-wide regime for fund marketing, it nevertheless represents a first step in this direction. The codification of common criteria and principles into guidelines to govern what is a fund marketing communication and how it should look like, paves the way to more future homogenisation in this space.
One word of caution is necessary though on what concerns the use of on-line and social media platforms for fund marketing. One of the principles expressed very clearly in the ESMA guidelines on marketing communications is that any marketing communication of a UCITS should follow the authorisation for marketing in a specific domicile. Here, whether purposedly or not, ESMA seems to miss a point related to marketing using social media channels. To the contrary of websites where it is possible potentially to limit or block IP addresses from certain countries, there isn’t really, as of yet, any type of similar functionality for tweets or Linkedin posts. Fund managers should pay particular attention when using social media for fund marketing communications in order to avoid that marketing communications are provided to investors in domiciles where their funds are not authorised for marketing.
Get in touch here with your contacts at Veneziano & Partners to see how we can help with UCITS marketing in Europe.