Order on Authorization for Alternative Investment Fund Managers to Market to Retail Investors

Order on Authorization for Alternative Investment Fund Managers to Market to Retail Investors¹)

Pursuant to Section 5, subsection 7, Section 5a, subsection 2, and Section 190, subsection 5, of the Act on Alternative Investment Fund Managers and others, cf. Act No. 2015 of 1 November 2021, the following is prescribed:

Scope of Application

Section 1. This Order applies to:

1. Alternative Investment Fund Managers from Denmark, who have authorization to manage alternative investment funds pursuant to Section 11 of the Act on Alternative Investment Fund Managers and others, and who wish to market the following alternative investment funds, which they manage, to retail investors in Denmark: a) Alternative investment funds with registered domicile in Denmark. b) Alternative investment funds with registered domicile in another country within the European Union or a country with which the Union has concluded an agreement in the financial area, for which the manager has notified marketing to professional investors in Denmark. c) Alternative investment funds with registered domicile in a third country, for which the manager has been granted authorization to market to professional investors in Denmark.

2. Alternative Investment Fund Managers from another country within the European Union or a country with which the Union has concluded an agreement in the financial area, who have authorization to manage alternative investment funds in accordance with rules implementing the AIFMD, and who wish to market the following alternative investment funds, which they manage, to retail investors in Denmark: a) Alternative investment funds from a country within the European Union or a country with which the Union has concluded an agreement in the financial area, for which the manager has notified marketing to professional investors in Denmark. b) Alternative investment funds with registered domicile in a third country, for which the manager has been granted authorization to market to professional investors in Denmark.

3. Alternative Investment Fund Managers from a third country who meet the conditions in Section 5a of the Act on Alternative Investment Fund Managers and others, and who wish to market the following alternative investment funds, which they manage, to retail investors in Denmark: a) Alternative investment funds from a third country meeting the conditions in Section 5a of the Act on Alternative Investment Fund Managers and others, for which the manager has been granted authorization to market to professional investors in Denmark. b) Alternative investment funds from a country within the European Union or a country with which the Union has concluded an agreement in the financial area, for which the manager has been granted authorization to market to professional investors in Denmark.

Definitions

Section 2. In this Order, the following terms are defined as:

1. Alternative Investment Fund: An entity as defined in a) Section 3, subsection 1, no. 1, of the Act on Alternative Investment Fund Managers and others, and rules issued pursuant to Section 3, subsection 8, of the Act on Alternative Investment Fund Managers and others, or b) rules implementing Article 4(1)(a) of the AIFMD.

2. The Governing Body: The management body as defined in Section 3, subsections 2 and 3, of the Act on Alternative Investment Fund Managers and others.

3. Retail Investor: An investor as defined in Section 3, subsection 1, no. 42, of the Act on Alternative Investment Fund Managers and others.

4. Financial Assets: Mortgage bonds, spot foreign exchange transactions for investment purposes with a view to profiting from price changes in currencies, and financial instruments as defined in rules implementing Annex I, Section C, of Directive 2014/65/EU of 15 May 2014 on markets in financial instruments.

5. Alternative Investment Fund Manager: An entity as defined in Section 3, subsection 1, no. 3, of the Act on Alternative Investment Fund Managers and others.

6. Marketing: Marketing as defined in Section 3, subsection 1, no. 31, of the Act on Alternative Investment Fund Managers and others.

7. Professional Investor: An investor as defined in Section 3, subsection 1, no. 39, of the Act on Alternative Investment Fund Managers and others.

8. Other Assets: All assets that are not financial assets, cf. no. 4.

9. The AIFMD: Directive 2011/61/EU of 8 June 2011 on Alternative Investment Fund Managers.

10. A Permanent Medium: A permanent medium as defined in Article 2(1)(m) of Directive 2009/65/EC of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).

Application

Section 3. An alternative investment fund manager wishing to market shares in an alternative investment fund, which it manages, to retail investors in Denmark, must apply for authorization from the Danish Financial Supervisory Authority (Finanstilsynet).

Subsection 2. The application must contain the following:

1. Documentation that the manager has notified or obtained authorization for marketing in Denmark in accordance with rules implementing the AIFMD.
2. A declaration from the supervisory authority in the manager's home country stating that the manager is subject to home country supervision and has authorization to manage the alternative investment fund, if the manager is domiciled in a third country.
3. A declaration from the supervisory authority in the alternative investment fund's home country stating that the alternative investment fund is subject to home country supervision, if both the manager and the alternative investment fund are domiciled in a third country.
4. The fund's articles of association, statutes, or other founding documents, unless the alternative investment fund has not yet been established.
5. The information available to investors regarding the alternative investment fund, pursuant to Section 62 of the Act on Alternative Investment Fund Managers and others, for example in the form of a prospectus or a similar document.
6. A Key Information Document (KID), pursuant to Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and Commission Delegated Regulation (EU) 2017/653 of 8 March 2017 supplementing Regulation (EU) No 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurance-based investment products (PRIIPs) regarding regulatory technical standards for presentation, content, review, and revision of key information documents and conditions for making such documents available.
7. The latest annual report, unless the alternative investment fund has not yet operated for a full accounting period, and any half-yearly report.
8. A copy of the risk frameworks (fund instructions) established by the governing body, cf. Section 5.
9. The name and address of the alternative investment fund's depositary, appointed pursuant to Section 45, subsection 1, of the Act on Alternative Investment Fund Managers and others, or rules implementing Article 21(1) of the AIFMD.
10. The application form on virk.dk for authorization to market shares in alternative investment funds to retail investors in Denmark, including: a) Name and address of the alternative investment fund and the manager, b) Description of the planned marketing in Denmark, including whether it involves direct or indirect marketing, c) Information on the extent to which the alternative investment fund may address the public in its home country, including information on whether the alternative investment fund may address retail investors if the alternative investment fund does not have registered domicile in Denmark, d) Information on the measures the manager intends to implement in this country to ensure investors' rights to dividend payments and redemption of shares, if the alternative investment fund does not have registered domicile in Denmark, e) If the alternative investment fund does not have registered domicile in Denmark, information on the information the alternative investment fund is required to provide to its investors under home country rules, including the information the alternative investment fund must provide if the fund ceases to market itself in this country, f) Names of the compartments and share classes covered by the application, and g) Information on where the master fund is established, if one of the funds is a feeder fund.
11. Any other documents the alternative investment fund is required to publish in its home country, if the fund does not have registered domicile in Denmark.

Subsection 3. Documents mentioned in subsection 2, nos. 1-4, 7, and 11, must be original documents or copies certified by persons who are authorized in writing to act on behalf of the alternative investment fund in this regard.

Subsection 4. Documents and information mentioned in subsection 2 must be drafted in Danish or English. This does not apply to the Key Information Document mentioned in subsection 2, no. 6, which must always be drafted in Danish.

Subsection 5. The Danish Financial Supervisory Authority must notify the manager of whether authorization has been granted no later than three months after receiving a complete application for authorization to market shares in an alternative investment fund or a compartment thereof to retail investors in Denmark, cf. subsection 2. The Danish Financial Supervisory Authority may extend the deadline by up to three months if the Authority deems it necessary due to the special circumstances of the case and after notifying the manager thereof.

Subsection 6. The manager may not market shares in the alternative investment fund to retail investors in Denmark until the manager has received authorization from the Danish Financial Supervisory Authority.

Subsection 7. The Danish Financial Supervisory Authority's authorization must state whether the manager has authorization to market the alternative investment fund to retail investors as an alternative investment fund that primarily invests in financial assets, or whether the manager has authorization to market the alternative investment fund to retail investors as an alternative investment fund that primarily invests in other assets.

Requirements for the Alternative Investment Fund to be Marketed to Retail Investors

Section 4. The manager must ensure that the alternative investment fund establishes its investment policy and risk profile in the alternative investment fund's articles of association, fund regulations, or other founding documents. The articles of association, fund regulations, or other founding documents must also contain provisions regarding the alternative investment fund's issuance and redemption of members' shares.

Subsection 2. An alternative investment fund that is open and primarily invests in financial assets must establish in its articles of association, fund regulations, or other founding documents provisions stating that the alternative investment fund must publish the issuance and redemption price at least every 14 days, and that the alternative investment fund must be open for redemption at least once a month.

Section 5. The manager's governing body must establish risk frameworks for the alternative investment fund or its compartments. The risk frameworks must be within the investment policy and risk profile set out in the articles of association, fund regulations, or other founding documents.

Subsection 2. The manager must notify the registered investors of changes and publish the changes no later than eight business days after a decision is made to change the fund's or a compartment's risk frameworks. The changes may not take effect until the fund's or compartment's investors have had the opportunity to redeem their shares.

Section 6. An alternative investment fund manager must ensure that the alternative investment fund complies with the risk frameworks established for the fund or compartment, cf. Section 5.

Subsection 2. If the alternative investment fund exceeds the investment policy, risk profile, or risk frameworks established in the articles of association, fund regulations, or other founding documents, or established by the manager's governing body, the breaches must be brought into compliance with the investment policy, risk profile, or risk frameworks immediately.

Subsection 3. The manager's governing body must publish breaches covered by subsection 2. The publication must take place no later than eight business days after a breach has occurred.

Master-Feeder

Section 7. If the alternative investment fund is a feeder fund, a condition is that the master fund is from a country within the European Union or a country with which the Union has concluded an agreement in the financial area, and that the master fund's manager is also from a country within the European Union or a country with which the Union has concluded an agreement in the financial area.

Information

Section 8. An alternative investment fund manager must, upon any subscription or redemption of shares in an alternative investment fund, provide information to the investor regarding the price at issuance or redemption.

Section 9. An alternative investment fund manager must, if the alternative investment fund has share classes, provide on its website information regarding the characteristics applicable to each share class and the principles for the allocation of costs.

Section 10. An alternative investment fund manager must publish information regarding the suspension or postponement of redemption of shares, replacement of the depositary or manager, changes in fee rates relative to investors, and changes in other material matters within three business days.

Section 11. If the alternative investment fund does not have registered domicile in Denmark, the manager must ensure the publication in this country of the documents and information that the alternative investment fund is required to publish continuously in the fund's home country. The publication must be made in the same manner as in the home country. However, the manager must ensure publication in this country if the home country's supervisory authority is the one publishing the information in the home country.

Subsection 2. Documents and information covered by subsection 1 must be drafted in Danish or English.

Changes to Information

Section 12. An alternative investment fund manager must notify the Danish Financial Supervisory Authority of planned material changes to the circumstances on which the authorization to market shares to retail investors was based, including material changes to information received by the Danish Financial Supervisory Authority in connection with the application. The notification must be made before the changes are implemented. Unforeseen changes must be notified to the Danish Financial Supervisory Authority immediately after the change has occurred.

Subsection 2. If the Danish Financial Supervisory Authority cannot approve the changes referred to in the notification in subsection 1, the Danish Financial Supervisory Authority must notify the manager thereof within one month after receiving the notification. The Danish Financial Supervisory Authority may extend the deadline by up to one month if necessary due to the special circumstances of the case. In such a case, the Danish Financial Supervisory Authority must notify the manager of any postponement of the deadline within one month after the Danish Financial Supervisory Authority has received the notification pursuant to subsection 1.

Subsection 3. The Danish Financial Supervisory Authority may, following notification to the manager pursuant to subsection 2, impose restrictions on or reject the changes planned by the manager. The Danish Financial Supervisory Authority may also require the manager to rectify the changes if they have already been implemented. The manager may implement or maintain the changes if the Danish Financial Supervisory Authority does not object to the changes before the deadline expires.

Tasks

Section 13. An alternative investment fund manager intending to market shares in an alternative investment fund in Denmark must be organized in such a way that it can perform the following tasks:

1. Process investors' subscription, payment, repurchase, and redemption orders in relation to shares in the alternative investment fund. Processing must be in accordance with the conditions set out in the alternative investment fund's documents.
2. Provide investors with information on how an order covered by no. 1 can be made, and how repurchases and redemptions are paid.
3. Facilitate the handling of information regarding the execution of investors' rights resulting from their investments in the alternative investment fund marketed in Denmark.
4. Provide investors with access to information and documents covered by Articles 22 and 23 of the AIFMD for the purpose of further investigation and requesting copies thereof.
5. Provide investors with information relevant to the tasks performed by the manager on a permanent medium.
6. Serve as a contact point for communication with the Danish Financial Supervisory Authority and other competent authorities.

Subsection 2. The manager may appoint a third party to perform the tasks referred to in subsection 1. The third party must be subject to regulation and supervision regarding the tasks performed by the third party. No requirements may be placed on the manager's physical presence in Denmark when performing the tasks referred to in subsection 1.

Subsection 3. The manager must ensure that the appointment of a third party is documented by a written agreement specifying which tasks under subsection 1 the third party performs on behalf of the manager. The written agreement must state that the third party receives all relevant information and documents from the manager.

Subsection 4. The manager must ensure that material for performing the tasks referred to in subsection 1, including electronic material, is made available in Danish, regardless of whether the tasks are performed by the manager or by a third party.

Key Information Document

Section 14. An alternative investment fund manager must, prior to the offering of shares in an alternative investment fund or a compartment thereof, prepare and publish on its website a Key Information Document (KID). The document must be prepared in accordance with Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and Delegated Regulation (EU) 2017/653 of 8 March 2017 supplementing Regulation (EU) No 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurance-based investment products (PRIIPs) regarding regulatory technical standards for presentation, content, review, and revision of key information documents and conditions for making such documents available.

Subsection 2. The Key Information Document must be drafted in Danish.

Cessation of Marketing to Retail Investors

Section 15. The Danish Financial Supervisory Authority may require the manager to cease marketing the alternative investment fund to retail investors in the following cases:

1. The manager's measures to ensure investors' rights to dividend payments and redemption of shares do not sufficiently protect investors' rights.
2. The alternative investment fund is not marketed in accordance with the marketing material.
3. The manager commits a gross or repeated violation of the rules in this Order or other relevant Danish legislation.
4. The manager's authorization to manage the alternative investment fund is revoked or otherwise lapses.
5. The manager has not paid fees to the Danish Financial Supervisory Authority in a timely manner.

Section 16. When an alternative investment fund manager decides to cease marketing the alternative investment fund or compartments thereof to retail investors in Denmark, the manager must notify all Danish investors thereof no later than 14 days after the decision is made, and notify the Danish Financial Supervisory Authority of the timing thereof. The same applies if the Danish Financial Supervisory Authority requires the manager to cease marketing the alternative investment fund, cf. Section 15.

Subsection 2. The manager of the alternative investment fund must simultaneously inform how the manager implements the measures pursuant to Section 3, subsection 2, no. 10, letter d), to ensure the rights of Danish investors.

Penalties

Section 17. Violation of Section 3, subsections 1 and 6, Sections 4-6, Sections 8-11, Section 13, subsections 1, 3, and 4, Section 14, and Section 16 is punishable by a fine.

Subsection 2. Companies and other legal entities may be held criminally liable pursuant to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 18. This Order enters into force on 1 January 2023.

Subsection 2. Order No. 976 of 19 May 2021 on authorization for alternative investment fund managers to market to retail investors is repealed.

Ministry of Business, 19 December 2022

Morten Bødskov / Hans Høj

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¹) The Order implements parts of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC, Regulation (EC) No 1060/2009 and (EU) No 1095/2010, OJ EU 2011 No L 174, p. 1, and parts of Directive (EU) 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 collective investment undertakings, OJ EU 2019 No L 188, pp. 106-115. Certain provisions from Regulation (EU) No 2017/653 of the European Parliament and of the Council of 8 March 2017 supplementing Regulation (EU) No 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurance-based investment products (PRIIPs) regarding regulatory technical standards for presentation, content, review, and revision of key information documents and conditions for making such documents available, and Regulation (EU) No 2014/1286 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs), OJ EU 2014 No L 352, p. 1, have been included in the Order. According to Article 288 of the TFEU, a regulation applies directly in each Member State. The reproduction of these provisions in the Order is thus solely justified by practical considerations and does not affect the direct validity of the regulation in Denmark.

Official Gazette A 2022 Published on 21 December 2022 19 December 2022. No. 1553. Ministry of Business, Danish Financial Supervisory Authority, Case No. 22-002603 CQ002376