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Some US sponsors have traditionally relied on a reverse solicitation strategy for capital raises in certain EU countries. If a potential investor from the relevant EU country approached the US sponsor on its own initiative for an investment in the fund, the position was generally taken that the EU-wide or local fund marketing rules did not apply.
In some cases, there was genuine own initiative from the side of the prospective investor. In other cases, the “own” initiative was stretched and in fact a direct consequence of pre-marketing efforts: prospective investors were approached in an earlier stage with pre-marketing materials (e.g. term sheets and pitch decks) and reached out later on, on that basis, for final fund documents.
With the implementation of the EU Cross Border Distribution Directive in August 2021, the stretched use of reverse solicitation – if already allowed in the first place - came to an end. If a sponsor has pre-marketed a fund to a prospective investor and that prospect (or any other prospect in the relevant country) reaches out for final fund documents within 18 months, the provision of the fund documents requires compliance with marketing rules. These rules apply for an offering benefitting from a pre-marketing passport and typically also apply under national private placement rules.
The door for reverse solicitation is still slightly ajar in certain EU countries. For example, responding to an ‘out of the blue’ outreach by a prospective investor may not trigger marketing rules. It is recommended to gather relevant evidence on the reverse solicitation process.
Want to know more about how to market your fund in Europe? Reach out to our experts from our NYC team.
