27 June 2011 - 3/2011
Statement of the Financial Supervisory Authority on the marketing in Finland of units of non-UCITS funds and collective investment undertakings (non-UCITS)
1 Legal basis and international regulatory framework
The marketing of units in non-UCITS funds and collective investment undertakings is governed by sections 129–132 of the Mutual Funds Act (48/1999). The Financial Supervisory Authority (FIN-FSA) has been granted regulatory powers to elaborate on the stipulations of the law in section 129 subsection 2, section 130 subsections 2 and 3, section 131 and section 132 of the Mutual Funds Act. By virtue of this regulatory power, FIN-FSA hereby issues a statement on the obligations relating to the intention to market units of collective investment undertakings (non-UCITS), the need for marketing permission, the translation requirements for the material subject to the obligation to disclose information, the language used in marketing and the procedure for termination of marketing. This interpretation revokes FIN-FSA’s interpretation on the marketing in Finland of collective investment undertaking units (UCITS, non-UCITS) (1/2007), issued on 28 February 2007.
FIN-FSA Standard (2.2) on the marketing of financial services and financial instruments, issued on 22 August 2006, also applies to all collective investment undertakings and their marketing in Finland.
2 Definition of collective investment undertaking
A collective investment undertaking refers to foreign investment funds and corresponding foreign undertakings engaged in collective investment (section 2, subsection 1, paragraph 10 of the Mutual Funds Act). Units of collective investment undertakings are regarded as securities in accordance with chapter 1, section 2, subsection 1, paragraph 5 of the Securities Markets Act (495/1989, SMA).
Collective investment undertakings can be categorised as follows:
a) Collective investment undertakings authorised to operate in a state belonging to the European Economic Area which, under the legislation of their home state, fulfil the requirements laid down in the UCITS Directive (2009/65/EC) (UCITS fund); and.
b) Other foreign collective investment undertakings including both non-UCITS authorised to operate in a state belonging to the European Economic Area and collective investment undertakings authorised to operate in a state outside the European Economic Area (hereinafter collectively ‘non-UCITS fund’).
Non-UCITS funds that market their units in Finland to non-professional investors must obtain a marketing permission from FIN-FSA (section 1, subsection 2 of the Mutual Funds Act). The application referred to in section 129 of the Mutual Funds Act must include the documentation and information required under section 130 of the Mutual Funds Act.
3 Marketing permission
A non-UCITS fund must obtain marketing permission from FIN-FSA in order to begin marketing its units in Finland. However, marketing permission is not required if the fund markets its units exclusively to professional investors. In such cases, the Mutual Funds Act is not applicable. However, if the units of a collective investment undertaking are securities in nature (other than as referred to in chapter 1, section 2, subsection 1, paragraph 5 of the SMA), the marketing is governed by the general provisions relating to the marketing and the obligation to disclose information, chapter 2, sections 1 and 2, of the SMA.
The SMA provisions on the duty to prepare a prospectus are only applicable to the marketing of collective investment undertakings of a closed-ended type. The Ministry of Finance Decree on the prospectus referred to in chapter 2 of the SMA (23 June 2005/452) states that the duty to prepare a prospectus in accordance with the SMA does not apply if the offering or applying for public trading concerns units of an investment fund or an open-ended collective investment undertaking (Ministry of Finance Decree 452/2005, section 7, subsection 1, paragraph 1). Since the Mutual Funds Act is not applicable to the marketing of open-ended non-UCITS funds when the target group is restricted exclusively to professional investors, as regards the marketing of units of such non-UCITS funds, there is no obligation either to disclose information in a specified form under the Mutual Funds Act or the Securities Markets Act.
4 Definition of marketing
FIN-FSA considers the marketing of units to refer to all sales promotion in Finland. Accordingly, the marketing of units includes the advertising of units in mass media, direct marketing channels (telephone, fax, mail and the Internet) and specific investor presentations. Marketing also includes the distribution of advertising material or brochures and the oral presentation of information on the premises of a collective investment undertaking or agent thereof and at meetings specifically organized for investors.
In FIN-FSA’s view, the characteristics of marketing are not met, nor is marketing permission required, in the following cases:
a) An asset manager that independently manages its customer’s funds on the basis of a customer-specific arrangement (so-called discretionary asset manager) subscribes to units of a non-UCITS fund for its customer without consulting the latter.
b) A securities intermediary subscribes to units of a specific non-UCITS fund on behalf of its customer at the express instigation of the customer.
c) Finnish investors can find the websites of non-UCITS funds and subscribe to their units via the Internet. This does not constitute cross-border provision of services if a collective investment undertaking does not otherwise market its services or the units in a non-UCITS fund for which it acts as an agent in Finland and if it does not intend to acquire customers resident in Finland. In addition, the websites or other material of the collective investment undertaking must not contain information or instructions specifically aimed at customers resident in Finland.
With regard to investment funds, marketing and offering are not divided into separate concepts. Even the initiation of marketing activities requires application for a marketing permission. The obligation does not arise only at the stage when units of a non-UCITS fund are offered (acceptance of subscriptions).
The marketing of unit link insurances is not considered marketing of a collective investment undertaking, but marketing of insurance products, to which the Mutual Funds Act does not apply.
5 Material subject to the obligation to disclose information
5.1 Information to be attached to application for marketing permission by non-UCITS funds
A non-UCITS fund applying for a marketing permission must attach its fund rules or articles of association, its fund prospectus, simlified prospectus, most recent annual report and half-yearly report published after the most recent nnual report. A non-UCITS fund must also attach the following material to its application:
a) Basic information on the collective investment undertaking
- official name and a possible marketing name
- since the collective investment undertaking is a non-UCITS, i.e. if it does not fulfil the conditions laid down in the UCITS Directive, how does it differ from them
b) Arrangements made for marketing units of the collective investment undertaking in Finland and subscription of units
- information on the planned marketing method (mass media, direct marketing over phone, fax or the Internet, specific investor presentations etc.)
- how and where can the units of the collective investment undertaking be subscribed and in which way does the investor make the payments arising from the subscription to the collective investment undertaking
- what expenses does the investor incur from the subscription payment
- in which currency should the payments be made
- the name and contact details of the collective investment undertaking’s agent in Finland and the agent’s role in relation to the collective investment undertaking hand the investor.
c) Safekeeping of units
- how is the safekeeping of units organised.
d) Payments to unit-holders.
If the collective investment undertaking distributes dividend to unit-holders, following information must to be submitted:
- how will the dividend be paid to the investors
- when will the dividend be paid
- in what currency will the dividend be paid
- what expenses, if any, will the investor incur for currency conversions
- how will the exchange rate be determined
- how will the investor’s return be taxed.
e) Manner of redemption of units in Finland
- how should a redemption claim be presented
- how will the redemption price of units be determined
- how soon will a customer receive payment for redemption of units
- in which currency do redemptions take place
- how is the exchange rate determined if redemptions take place in a currency other than the currency of calculation of the collective investment undertaking.
f) How and where are the documents and information kept available which the collective investment undertaking is required to publish
- can an investor get documents for example from the agent in Finland
- where can an investor order the documents from (it must be possible to order documents free of charge to Finland, or they must otherwise be kept available to investors so that they do not have to fetch the material from another country)
- how are unit-holders notified of changes relating to the collective investment undertaking on the basis of the undertaking's rules or articles of association and/or legislation of the state of registration (for further information on such notifications, see section 6.2 below)
- how is the value of the collective investment undertaking unit published.
A non-UCITS fund must attach to the application for a marketing permission a certification from the home state authority that the non-UCITS fund has been authorised to operate in its home country and that it is subject to supervision by the authority.
In addition to the material listed above, the application for a marketing permission must also include the following attachments:
1. any quarterly report published after the most recent half-yearly report
2. documentation certifying that the legislation on investor protection and supervision of the state of registration of the collective investment undertaking complies with the criteria laid down in EU legislation and that the cooperation between the authority supervising the collective investment undertaking and FIN-FSA has been adequately ensured.
The language requirements are set out in section 6.1 below.
Unless a non-UCITS fund is, by virtue of the home state legislation, required to prepare and publish the aforementioned documents or if FIN-FSA considers that they do not comply to a sufficient degree with the contents of the documents that Finnish special mutual funds (non-UCITS) are required to prepare and publish, such documents must be prepared for the marketing in Finland in line with the requirements on Finnish special mutual funds set out in the Mutual Funds Act.
As regards non-UCITS umbrella funds, FIN-FSA handles every sub-fund separately. Marketing permission is not granted automatically to all sub-funds of an umbrella fund. When a non-UCITS umbrella fund wishes to commence the marketing of a new sub-fund in Finland, a new marketing permission procedure is commenced concerning the sub-fund.
Marketing permission can be granted if investors are considered to enjoy protection under section 129, subjection 1 of the Mutual Funds Act and the non-UCITS, in terms of its investment policy and otherwise, fulfils the requirements set for Finnish special mutual funds (non-UCITS). FIN-FSA considers that sufficient investor protection is ensured if the unit-holders can be deemed to enjoy protection adequately corresponding to that referred to in the Mutual Funds Act, provided that, according to the home state legislation of the non-UCITS fund, it is under supervision corresponding to the legislation of the European Community and that cooperation between the authority supervising the non-UCITS fund and FIN-FSA has been adequately ensured.
6 Language requirements
6.1 Language to be used in material subject to the obligation to disclose information
The material under the obligation to disclose infomation must always be provided in the original language, and translated as provided below. If the original language is Finnish or Swedish the material need not be submitted in English.
The contents of the translations must be uniform with the original documents. However, translations are not required to be sworn as true. The responsibility for the correctness and contents of the translations lies on the collective investment undertaking.
Non-UCITS funds must submit the following documents in Finnish or Swedish:
1. fund rules or articles of association
2. fund prospectus
3. simplified prospectus
4. a separate document to be distributed to Finnish investors on the arrangements made for marketing (can be drafted in Finnish or Swedish only)
5. any other marketing material published in the home state.
The following documents must be translated into English (unless the original language is Finnish or Swedish):
1. annual report
2. half-yearly report
3. quarterly report.
In addition, non-UCITS must always publish forms for the subscription and redemption of units in Finnish or Swedish.
The tighter translation requirements pertaining to non-UCITS arise from the special characteristics of these funds. FIN-FSA considers that, in order to ensure sufficient investor protection, the characteristics of the activities and investment policy of non-UCITS which differ from those of UCITS funds must be made evident in Finnish or Swedish.
6.2 Other announcements concerning collective investment undertakings to investors
Collective investment undertakings marketing their units in Finland must publish such announcements concerning them which they are obliged to provide for unit-holders on the basis of their home state legislation, fund rules, articles of association, prospectus or home state practices. Announcements can for example pertain to the suspension of redemption of units, error in value calculation, change of portfolio manager etc. Unit-holders must be treated equally, and therefore announcements must always be provided to all unit-holders, in the same manner, irrespective of the home state of the unit-holder.
Instead of Finnish or Swedish, announcements given in Finland by foreign collective investment undertakings can be published in English if unit-holders have been informed of this in the document referred to in section 5f above.
6.3 Language to be used in marketing
As a rule, Finnish or Swedish must always be used when marketing non-UCITS in Finland to other than professional investors.
However, this principal rule can be departed from in the following circumstances:
a) Under chapter 4, section 4, paragraph 2, of the SMA, a securities intermediary must provide customers with all information on the investment service and the securities pertaining to it that may have a material impact on the customer’s decision-making. Consequently, FIN-FSA takes the view that a securities intermediary may use a language that is widely used in the Finnish financial markets (English) when it markets units of collective investment undertakings to its customers.
b) If a separate marketing event of a collective investment undertaking is organised exclusively to professional investors, a language that is widely used in the Finnish financial markets can be used in the event (English).
6.4 Use of the name of the collective investment undertakings in marketing
The official name of a collective investment undertaking must become evident in all material subject to the obligation to disclose information and marketing material of the undertaking. If a collective investment undertaking intends to use a name other than its official name in marketing (so-called marketing name) it must notify FIN-FSA thereof. Even if a marketing name or a translation from the official name is used in marketing, the official name must nevertheless always be stated in the same material.
By virtue of section 132 of the Mutual Funds Act, FIN-FSA can require, as necessary, that an explanatory supplement be added to the name.
7 Date of commencement of marketing
A non-UCITS may begin marketing its units in Finland only after receiving marketing permission from FIN-FSA. Separate permission is granted for each sub-fund of a non-UCITS umbrella fund which is intended to be marketed in Finland.
8 Timeliness of documentation and information
The documents and information referred to in sections 129 and 130 of the Mutual Funds Act must be kept constantly up to date. Typically, changes in the documents are prompted by the introduction of new sub-funds of umbrella funds or termination of existing funds. Other such factors include amendments to fund rules in general or change of custodian.
Collective investment undertakings must notify FIN-FSA on changes in documents or information without delay and provide it with the updated documents. Updated documents must be submitted to FIN-FSA in original and in translation where necessary, in accordance with the language requirements set out under section 6 above. The documents can be filed electronically as described in section 9 below.
9 Filing of documents to FIN-FSA
The application form and its attachments must be submitted to FIN-FSA by mail with the appropriate signatures. If desired, the material to be attached to the application form may be submitted electronically.
10 Suspension of redemptions
A collective investment undertaking that markets its units in Finland must inform FIN-FSA if it suspends the redemption of its units temporarily.
This is based on Article 84(3) of the UCITS Directive which states that a collective investment undertaking must without delay communicate to competent authorities if it decides, on the basis of law, fund rules or articles of association, to temporarily suspend the redemption or repurchase of its units. The communication must be made to the appropriate authorities of all states in which the collective investment undertaking markets its units.
11 Termination of marketing and merger or division
11.1 Termination of marketing of units in Finland
Before ending the marketing of a non-UCITS fund, the collective investment undertaking must notify FIN-FSA of its decision. The notification must, in addition to the basic information on the non-UCITS fund, include the following information:
a) when will the marketing be terminated
b) in which national newspaper and when will the announcement be published.
Prior to the ending of the marketing of units, a collective investment undertaking must, in addition to the notification made to FIN-FSA, according to section 130, subsection 4 of the Mutual Funds Act, publish an announcement on the termination of marketing in at least one national newspaper. The announcement is to provide information on
a) the manner in which payments will be made to unit-holders in the future
b) the manner in which and the place where the redemption claims of the units shall be presented and
c) how and where are the documents and information kept available which the collective investment undertaking is required to publish.
11.2 Merger or division of a collective investment undertaking
FIN-FSA and the unit-holders must be informed of a merger or division of a collective investment undertaking in accordance with the home state legislation of the collective investment undertaking.
If the home state legislation of the collective investment undertaking does not require that a newspaper announcement be published or a private letter be sent to unit-holders, the procedures for the termination of marketing of units, as specified in section 11.1 above, are applied in case of a merger or division of a collective investment undertaking marketed in Finland.
12 Definitions
Sub-fund
A fund operating under an umbrella fund-structured foreign collective investment undertaking which is not an independent collective investment undertaking.
Professional investor
Person referred to in chapter 1, section 4 of the SMA
Marketing permission
Permission for which a non-UCITS has to apply, by virtue of section 129 of the Mutual Funds Act allowing commencement of marketing of units in Finland. For more detailed information, see section 3.2 above. Marketing permission shall be granted to each sub-fund separately.
Marketing material
Voluntarily prepared material aimed at sales promotion, other material than that subject to the obligation to disclose information by a collective investment undertaking.
Non-UCITS fund
A collective investment undertaking founded on the basis of national legislation which does not fulfil the conditions laid down in the UCITS Directive (2009/65/EC).
Umbrella fund
A collective investment undertaking containing sub-funds, each of which has a different investment policy.
UCITS Directive
Directive 2009/65/EC of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (so-called UCITS IV Directive).
Material subject to the obligation to disclose information
Material as referred to in section 130, subsection 1, paragraphs 2–7 of the Mutual Funds Act. For more detailed information, see section 5.
UCITS fund
A collective investment undertaking fulfilling the requirements of the UCITS Directive (2009/65/EC).
13 Contact information and payments
Notifications and applications concerning the marketing of units of collective investment undertakings may be submitted under the following address:
Financial Supervisory Authority
Market Supervision
Investment Products
P.O. Box 159 (Snellmaninkatu 6)
FI-00101 HELSINKI
The e-mail address for the material to be submitted electronically is funds(at)finanssivalvonta.fi.
FIN-FSA charges a fee for processing an application for marketing permission of a non-UCITS in accordance with its schedule of specific fees. The fee is charged in arrear after the application has been processed. A separate permission must be applied to market a new sub-fund of a non-UCITS umbrella fund, which is subject to a separate fee. No fee is charged for a notification of termination of marketing of a collective investment undertaking.
Additional information
For further information, please contact Johanna Örndahl, Market Supervisor, tel. +358 10 831 5306.