The Investment Funds and Management Companies Amendment Act and the Alternative Investment Fund Managers Amendment Act
Author: Katra Rangus
On 24 September 2021, the National Assembly of the Republic of Slovenia adopted the Investment Funds and Management Companies Amendment Act (hereinafter: the “ZISDU-3D“) and the Alternative Investment Fund Managers Amendment Act (hereinafter: the “ZUAIS-B“). Both Acts were published in the Official Journal of the Republic of Slovenia No 161/2021 on 6 October 2021 and entered into force on 21 October 2021.
Their adoption implements: (1) Directive 2019/1160 of the European Parliament and of the Council of 20 June 2019 amending Directives 2009/65/EC and 2011/61/EU as regards cross-border distribution of UCITS (OJ L 188, 12.7.2019, p. 106 hereafter: “Directive 2019/1160/EU”) and (2) Directive 2019/2034 of the European Parliament and of the Council of 27 June 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5 December 2019, p. 64, hereinafter: “Directive 2019/2034/EU“); namely, in the ZISDU-3D, as regards UCITS1 and management companies and, in the ZUAIS-B, as regards alternative investment fund managers (“AIFMs“).
ZISDU-3D also implements Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issuance of covered bonds and the public oversight of covered bonds and amending Directives 2009/65/EC and 2014/59/EU (OJ L 328, 18.12.2019, p. 29).
Significant Changes Provided by the ZISDU-3D
In order to implement the above-mentioned Directives in the Slovenian legal order, several new solutions have been introduced in the area of investment funds and management companies. The ZISDU-3D provides for the supervisory authority to proceed upon receiving any information on changes concerning the management company’s branch located in the host Member State.
In line with Directive 2019/1160/EU (Article 1(2)), the provisions on marketing communication with investors are deleted. In this respect, during the process of the Act’s adoption, a representative of the Securities Market Agency (hereinafter: “SMA”), in a discussion before the Finance Committee of the National Assembly of the Republic of Slovenia, explained that the rules on advertising will be provided by binding guidelines, which will also include alternative funds (i.e. professional investors). In this context, the SMA pointed out that it will ensure that an adequate system will be established in order to protect fund investors.2
By amending the conditions for the marketing of units of UCITS of a Member State in the Republic of Slovenia, the legislator, in order to ensure the benefit of the investor, has regulated the conditions for ensuring that all necessary facilities are available in the Republic of Slovenia for the smooth processing of investor orders, the manner in which orders are placed, the facilitation of the processing of information, and access to the resolution of investor complaints and the information necessary to ensure that the investor is kept informed. A management company located in a Member State (hereinafter: a “Management Company”) shall also be obliged to provide all relevant information to investors in the Republic of Slovenia, on a durable medium, in relation to the services it performs in the Republic of Slovenia and to establish the conditions for acting as a contact point for communication with the SMA.
All the described facilities, including electronic ones, must be provided by the Management Company in the territory of the Republic of Slovenia in the Slovene language. This may be provided by the Management Company itself or through an authorised person.
With the entry into force of ZISDU-3D, Management Companies are also obliged to provide in their respective notification document an information regarding the marketing of UCITS in the Republic of Slovenia, and other information necessary for the charging of fees and charges levied by the SMA.
The ZISDU-3D additionally regulates the cancellation of the marketing of units of a UCITS of a Member State in the Republic of Slovenia. A Management Company may cancel the marketing of UCITS units in the Republic of Slovenia or of individual UCITS units only if it informs the UCITS unitholders, in advance, that they may, within a period of at least 30 working days from the announcement of the offer, request the redemption of the UCITS units without incurring exit charges. The intention to cease marketing the UCITS units in the Republic of Slovenia shall be published in a publicly accessible medium. Effective from the date of cancellation of the marketing of the UCITS units, the Management Company shall be obliged to modify or terminate all contractual relationships with financial intermediaries and other persons in order to prevent any new or further, direct or indirect, offers for the subscription and redemption of the UCITS units of the Member State which is the subject of the foregoing cancellation. All information relating to the cancellation shall be communicated to investors in the Slovene language. In accordance with ZISDU-3, which regulates investor information, following the termination of the marketing of the UCITS units, the Management Company shall be further obliged to provide the remaining unitholders from the Republic of Slovenia with information and documentation on the UCITS of the Member State. The arrangements for the cancellation of the marketing of units of a mutual fund in the host country are also substantially identical.
Furthermore, ZISDU-3D amends the provisions on modifications to the notification document. In this respect, the Management Company is obliged to notify investors of any modification at least one month before its implementation.
Significant Changes Provided by the ZUAIS-B
By amending the Alternative Investment Fund Managers Act, the legislator wanted to allow easier, faster and more economical cross-border distribution of alternative investment funds (hereinafter: “AIFs”) in the European Union.
For this purpose, the pre-marketing by AIFMs established in the Republic of Slovenia and AIFMs of an EU Member State in the Republic of Slovenia, and the conditions for such pre-marketing, are newly regulated and facilitated. During the pre-marketing phase, the AIFM shall provide information and communication on investment strategies and investment ideas to professional investors established in the Republic of Slovenia in order to verify whether potential professional investors in the AIF would be interested in investing in an AIF which has not yet been established or which has already been established but has not yet been notified for marketing. Investors will not be allowed to purchase units of an AIF during the pre-marketing.
The amendment harmonises the concept of a professional client with the definition of a professional client in Directive 2011/61/EU.
In accordance with the requirements of Directive 2019/1160/EU, the conditions for the cancellation of the marketing of units of AIFs have been specified. The new Article 217a, which implements Article 2(4) of Directive 2019/1160/EU, specifies clear conditions for the cancellation of the marketing of AIFs and AIFs of a Member State in the Republic of Slovenia in order to protect the interests of AIFMs and investors in AIF units. The manager of an AIF of a Member State may cancel the marketing of units of AIFs and AIFs of a Member State in the Republic of Slovenia subject to the following conditions applicable to the AIFMs of the Member State:
- the offer to repurchase or redeem is free of any payments or deductions in respect of all units of the AIF to which the cancellation relates and which have been publicly available to investors in the Republic of Slovenia for at least 30 business days, and is addressed (directly or indirectly through financial intermediaries) individually to all investors in the Republic of Slovenia whose identity is known3;
- the intention to cancel the marketing of some or all of the AIFs in the Republic of Slovenia is made public, through a publicly accessible medium; and
- the AIFM has to amend or terminate contracts with financial intermediaries with effect from the date of cancellation of the marketing of the AIF in order to prevent any new or further offers, direct or indirect, or sales of units identified in the notification.
Effective from the date of cancellation, the Member State AIFM shall terminate all such offers and sales of units of the AIF as specified in the notification to the SMA by the supervisory authority of the Member State AIFM.
An AIFM which cancels the marketing of units of an AIF in accordance with the prescribed conditions will not be permitted to carry out pre-marketing of units of the AIF referred to in the cancellation notice or in relation to similar investment strategies or investment ideas for a period of 36 months from the date of cancellation of the marketing.
In the same fashion, under the new Article 208a, an AIFM may cancel the marketing of units of AIFs and Member State AIFs in the Member States, subject to notification to the Securities Market Agency.
[1] UCITS means a collective investment undertaking for investment in transferable securities. A UCITS is an open-ended investment fund that collects assets publicly and:
- the units of which are capable of being redeemed and paid out of the assets of the fund at the request of the holder, or an investment fund for which it is otherwise adequately ensured that the price at which its units are traded on a regulated market is at all times equal to, or does not materially vary from, their calculated value;
- the sole purpose of which is to invest its assets in securities and other liquid investments on a risk diversified basis; and
- which is established and managed in accordance with the Investment Funds and Management Companies Act (Official Journal of the Republic of Slovenia No: 321/15, as amended and supplemented, ISDU-3) or with the regulations of the Member States adopted for the purpose of transposing Directive 2009/65/EC.
[2] The Committee on Finance of the DZ RS: Report on the Bill on Amendments and Additions to the Investment Funds and Management Companies Act (ZISDU-3D), abbreviated procedure, EPA 1993-VIII.
[3] The above does not apply to closed-end AIFs and funds established in accordance with Regulation 2015/760/EU (European Long-Term Investment Funds).
