Marketing of non-EU AIFs: Changes to the Danish Article 42 notifications

The Executive Order provides new information and documentation requirements that will apply to AIFMs submitting an application for marketing of units in non-EU AIFs. Further, the Danish Financial Supervisory Authority will be able to extend its processing time with an additional three months if necessary based on special circumstances of the application. The Executive Order will enter into force on 1 January 2021 and apply to all applications submitted from that time. AIFMs that have already been granted an authorization to market units of an AIF do not need to submit new applications but will be able to rely on their existing notification.

EU Directive 2011/61 on Alternative Investment Fund Managers (“AIFMD”) has been implemented into Danish Consolidation Act No 1047 of 14 October 2019 (“AIFM Act”) and various executive orders issued pursuant thereto. The national notification regime under Article 42 was implemented into section 130 of the AIFM Act with further rules detailing the information and documentation required under Executive Order No 798 of 26 June 2014 on Marketing of AIFs from a Third Country in Denmark (“2014 Marketing Order”). The 2014 Marketing Order will from 1 January 2021 be replaced by Executive Order No 1504 of 19 October 2020 (“New Marketing Order”).

The New Marketing Order applies to both EU AIFMs and non-EU AIFMs intending to market units of non-EU AIFs to professional investors in Denmark. Marketing to retail investors is subject to a separate authorization regime and are thus not described further here.

Information and documentation required for applications

A number of documentation and information requirements from the 2014 Marketing Order have been reenacted in the New Marketing Order and thus remains the same. Accordingly, the following information and documentation must still submitted when applying for authorization to market units of non-EU AIFs:

1. Programme of operations identifying the AIF which the AIFM intends to market and information on the country where the AIF is established;
2. The constitutional documents of the AIF such as e.g. AIF rules, limited partnership agreement, articles of association, certificate of registration and/or instruments of incorporation;
3. Any information on the AIF available to investors, e.g. prospectus/PPM and Art 23 wrapper;
4. Information on arrangements established to prevent units of the AIF from being marketed to retail investors, including in situations where the AIFM relies on activities of independent entities to provide investment services in respect of the AIF;
5. Statement from the authorities (or a qualified lawyer) of the home country of the AIF stating that the home country is prepared to give similar Danish AIF’s permission to market shares or units in the country in question (the so-called “reciprocity statement”)
6. Name and address of the depositary for each AIF;
7. The latest annual report. If the AIF has not conducted business for an entire accounting period, the application must contain the latest interim report if the entity prepares such interim report;
8. The Danish FSA’s notification letter containing the following information:
   1. Name and address of the AIF(s) and the AIFM.
   2. Names of the departments and share-classes covered by the application.
   3. If and to what extend the AIF is permitted to approach the public in the home country of the AIFM and the AIF.
   4. The measures established in order to secure the rights of the investors to receive dividends and redeem units
   5. Information, which the AIF is required to disclose to its investors under the rules of the home country, including information that must be provided if the AIF is to cease marketing in Denmark.
   6. Information about where the master-fund is established, if one of the AIFs is a feeder-fund.
9. Any other documents, which the AIF is required to disclose in the home country.

The New Marketing Order does, however, set out a number of new requirements that AIFMs intending to submit a notification should be mindful of. The new requirements are relevant to both EU AIFMs and non-EU AIFMs.

Accordingly, when an EU AIFM wishes to market units of a non-EU AIF the following new information and documentation requirements apply:

1. Documentation that the EU AIFM is authorized to manage AIFs under the rules implementing the AIFMD;
2. Documentation from the supervisory authority in the home country of the AIF that the AIF is covered by the cooperation agreement entered into between the Danish FSA and the authorities in the home country of the AIF, cf. section 109(1), no. 3, of the AIFM Act.

In case the AIFM is a non-EU AIFM the new information and documentation requirements applying from 1 January 2021 are the following:

1. Documentation from the supervisory authority in the AIFM’s home country that the AIFM and the AIF are covered by the cooperation agreement entered into between the Danish FSA and the authorities in the AIFM’s home country, cf. section 130(3) of the AIFM Act, if the AIFM and the AIF have registered their domicile in the same third country.
2. Documentation from the supervisory authority in the AIFM’s and in the AIF’s home country that the AIFM and the AIF are covered by the cooperation agreement between the Danish FSA and the authorities in the AIFM’s and the AIF’s home country, cf. section 130(3) of the AIFM Act, if the AIFM and the AIF have registered their domicile in two different third countries.

Pursuant to the statement published in connection with the consultation of the New Marketing Order, the purpose of the new information and documentation requirements is to ensure that the rules under the AIFMD are implemented as close to the wording of the directive as possible. Given that the new notification requirements have only recently been adopted and do not apply until 1 January 2021 the Danish FSA has not published new notification forms yet. It is therefore unclear what the Danish FSA will require in respect of format and how applicants should meet the new documentation requirement until the Danish FSA publishes new notification forms or guidance.

Processing time by the Danish FSA

Under the New Marketing Order, the Danish FSA will continue to have three months to process the application subject to submission of a complete application. Further, the Danish FSA will be able to extend the deadline with an additional three months if the Danish FSA considers it necessary based on special circumstances of the application.

Existing notifications and grandfathering

The New Marketing Order establishes a grandfathering regime for AIFMs that have already obtained authorization prior to 1 January 2021. This means that AIFMs that have already been granted authorization to market units of non-EU AIFs do not need to submit a new application but can continue to market units of the AIFs to professional investors in Denmark under their existing authorization.