Brexit: Marketing of funds in Norway from 1st January 2021 requires authorisation

Finanstilsynet reminds that companies established in the United Kingdom, effective from 1st January 2021, can no longer provide cross border activities in accordance with the rules in the UCITS Directive and the AIFMD that apply to the EEA, as a basis for conducting business in Norway. This applies to both marketing of funds and cross-border services. The right to conduct business in Norway under the notification regime will no longer apply, and Finanstilsynet will update the business register to reflect this (deregister companies and funds).

Below states on which basis marketing of funds in Norway expires at the end of the year. Furthermore, information is provided on which grounds an application can be made for marketing funds in Norway, where a manager or fund is established in UK (third country). Information is also provided regarding a simplified application procedure for funds currently marketed in Norway. To use this simplified procedure, applications must satisfy the requirements set out in section 2.2 and be sent to Finanstilsynet no later than the 6th of December 2020. Funds that have applied to continue to be marketed in accordance with this procedure may be marketed in Norway until the application has been processed.

1. Repeal of right to market funds in Norway - deregistration

Below follows on which basis marketing of funds in Norway expires at the end of the year. information on which grounds an application can be made for marketing funds in Norway, where a manager or fund is established in UK (third country). Information is also provided regarding a simplified application procedure for funds currently marketed in Norway. To use this simplified procedure, applications must satisfy the requirements set out in section 2.2 and be sent to Finanstilsynet no later than the 6th of December 2020. Funds that have applied to continue to be marketed in accordance with this procedure may be marketed in Norway until the application has been processed.

Foreign funds (UCITS and alternative investment funds) can be marketed in Norway according to different rules, depending on the nature of the fund and the geographical location of both the fund and the manager. Undertakings authorized in the United Kingdom to manage funds under Directive 2009/65 / EC (UCITS Directive) and Directive 2011/61 / EU (AIFMD) will lose the rights arising from these Directives from 1st January 2021, and will be considered managers established outside the EEA (third country). This also means that UCITS funds established in the United Kingdom will from 1st January 2021 be regarded as alternative investment funds established outside the EEA. The same applies to UCITS funds established in another EEA country, but which are managed by managers established in the United Kingdom.

The following legal grounds to market fund will cease as of January 1st, 2021 for funds and companies affiliated with the United Kingdom will cease:

• The right to market UCITS funds established in the United Kingdom under the notification rules of the UCITS Directive
• The right to market UCITS funds established in an EEA country other than the United Kingdom that are notified for marketing under the UCITS Directive, where the management company is established in the United Kingdom
• The right to market alternative investment funds established in the United Kingdom to professional investors in accordance with the notification rules of the AIFMD. This applies both where the manager is established in the United Kingdom and where the manager is established in an EEA country
• The right to market alternative investment funds established in an EEA country other than the United Kingdom to professional investors in accordance with the notification rules in the AIFMD if the manager is established in the United Kingdom
• The right to market alternative investment funds established outside the EEA to professional investors where the manager, being established in the United Kingdom, has permission to market the fund in accordance with the AIF Act § 6-4 (AIFMD Article 36).

2. Permission to market funds in Norway

2.1 Basis for marketing alternative investment funds in Norway where funds or managers are established in third countries

Norwegian fund legislation (the Securities Funds Act and the AIF Act) allows funds established in a third country to be marketed in Norway with permission from Finanstilsynet. Correspondingly, Finanstilsynet may grant authorisation to market funds established in the EEA where the manager is established in a third country.

Marketing to non-professional investors:

• Securities funds may be marketed to non-professional investors in accordance with the Mutual Funds Act § 9-4. Requirements for authorisation will include previously notified UCITS funds which due to Brexit are being reclassified as alternative investment funds.

Marketing to professional investors:

• Alternative investment funds where the manager is established in a third country may be marketed to professional investors in accordance with the AIF Act § 6-5 (AIFMD article 42)
• Alternative investment funds established in a third country where the manager is established in the EEA, can be marketed to professional investors in accordance with the AIF Act § 6-4 (AIFMD Article 36).

2.2 Simplified procedure for applications to market funds in Norway - special cases

Alternative investment funds that are marketed in Norway with an authorisation in accordance with the AIF Act § 6-4
If a manager established in the United Kingdom currently markets an alternative investment fund established in a third country to professional investors in Norway on the basis of the AIF Act § 6-4 (AIFMD Article 36), this authorisation may be converted to an authorisation pursuant to the AIF Act § 6 -5 (AIFMD Article 42) after a simplified process. The same applies if the fund is a feeder fund for an alternative investment fund established in a third country. An authorisation to market the fund pursuant to the AIF-act § 6-5 will be limited to professional investors.

In order to use the simplified process, the manager must inform Finanstilsynet of the intention to convert the authorisation, including clearly identifying the manager and fund (by specifying LEI and ISIN), and the license granted pursuant to § 6-4 of the AIF Act. At the same time, the following must be confirmed:

• That the fund and the manager will continue to be subject to satisfactory supervision in the home state, and that the requirements that apply to conducting business in the home state are met
• That the manager will comply with the rules in the AIF Act Chapter 4 with regulations
• That the manager will do what is necessary in Norway to be able to make payments to investors, redeem units and provide the information that the manager must prepare in accordance with the rules in the United Kingdom, cf. AIF Act § 6-5 subsection (1)(d), cf. AIF Act § 6-4 subsection (1)(b).

Conversion to an authorisation pursuant to section 6-5 of the AIF Act will entail reporting obligations to Finanstilsynet according to AIFMD Annex IV.

UCITS funds currently marketed according to notification under the UCITS Directive:
A UCITS fund established in the United Kingdom currently notified for marketing to investors in Norway pursuant to the UCITS Directive may, after a simplified application process, be marketed to non-professional investors in accordance with the Securities Funds Act § 9-4. The same applies to UCITS funds established in another EEA country, where the funds are managed by a management company in the United Kingdom.

The manager must clearly identify the manager and fund in the application, by including relevant LEI and ISIN codes, and state when the fund was notified for marketing in Norway.

The manager must confirm the following in the application:

• That the fund is classified as a UCITS fund until 31 December 2020
• That there are no plans to make changes to the fund's characteristics from 1 January 2021, including in the investment mandate, the model for costs and redemption rights, compared with the fund's characteristics as a UCITS fund
• That the fund and the manager will continue to be subject to satisfactory supervision
• That the fund and the management meet the requirements that apply to running the business in the home country, including that the fund will still be organised with a custodian
• That information about the fund will still be available to investors in Norway, including articles of association, prospectus, key information or equivalent
• That available fund documentation contains information on costs related to investing in the fund, including current management fees and costs of subscription and redemption

In addition, the following information must be provided:

• How the mutual fund units will be sold in Norway, and how investors in Norway can redeem their units.

If the fund is also to be marketed to professional investors, an authorisation is also required in accordance with § 6-5 of the AIF Act. In that case, the simplified procedure set forth above can be used.

Applications for the simplified procedures must be sent to post@finanstilsynet.no no later than the 6th of December 2020.