ESMA's guidelines on marketing communications under Regulation on cross-border distribution of funds (EU 2019/1156) dated 2 August 2021 will apply from next week, 2 February 2022.

While the guidelines do not provide a definition of 'marketing communications' it does set out a non-exhaustive list of communications that may or may not be considered marketing communications. In scope communications include, messages broadcasted over social media when such messages refer to any characteristics (including the name), of a UCITS or an AIF and marketing materials addressed individually to investors or potential investors. Examples of out-of-scope communications include, legal and regulatory documents of a fund and corporate communications describing the fund managers activities or recent market developments.

The guidelines apply to AIFMs, UCITS management companies and EuVECA and EuSEF managers. Such fund managers should ensure that their marketing communications are consistent with the requirements set out in the guidelines.

These guidelines do not replace existing national requirements on the information to be included in marketing communications but do cover the requirements relating to: (A) the identification of marketing communications; (B) the description of risks and rewards in an equally prominent manner; and (C) the fair, clear and not misleading character of marketing communications. We highlight further detail on each of these limbs below.

(A) Identification of marketing communications

• Only include references to a UCITS or an AIF in certain communications once they have been approved for, or the fund manager has received a notification that they may commence, marketing.
• Marketing communications should be identifiable and include a disclaimer that it is such and that other legal and marketing documents should be reviewed before making any final investment decisions.
• Where such a marketing disclaimer is not fit to the format and length of an online marketing communication, it may be replaced by a shorter identification that it is a marketing communication, e.g. the words "#MarketingCommunication" for messages posted via social media platforms.

(B) Description of risks and rewards in an equally prominent manner

• Marketing communications should not refer to rewards without referring to risks and such communication should not cross-refer to another document for the description of risks.
• An assessment of the equal prominent disclosure of risks and rewards should take place in relation to both the presentation and the format of such descriptions.
• The font size used to describe risks should be at least equal to the predominant font size used throughout the communication and its position should ensure such indication is prominent.

(C) Fair, clear and not misleading character of marketing communications

• Information contained in the marketing communication should be consistent with the information contained in other legal and regulatory documents provided by the fund (e.g., the PPM, a KID or KIID, or annual and half-yearly reports).
• Ensure the language and content of the marketing communication is suitable to the potential investors (e.g., retail investors).

It is important for fund managers to consider the guidelines more broadly against their marketing materials as they also set out guidance relating to information on costs, past and expected performance and sustainability-related aspects.

For further information on the above, please reach out to your usual Clifford Chance contact.

Authors: Joseph Paddon and Alberto Claretta-Assandri