Latest ESMA Guidelines on Cross-Border Distribution

The European Securities and Markets Authority (ESMA) has recently introduced updated guidelines for cross-border distribution of funds, emphasizing transparency and investor protection in marketing communications. The new framework highlights several key areas:

Identification of Marketing Communications

Marketing materials for UCITS and AIFs must secure prior regulatory approval when required. Such communications must explicitly state they are marketing in nature, using terms like “Marketing Communication” or concise tags like “#MarketingCommunication” on platforms such as social media. Investors are directed to refer to the fund’s prospectus or related documentation for detailed insights. Disclaimers must be clearly integrated, such as within videos rather than appended at the end.

Description of Risks and Rewards

Both risks and rewards must be presented equally and fairly, avoiding techniques like footnotes to downplay risks. These elements should be displayed side by side or in a manner that ensures equal prominence, leveraging tables or lists for visual clarity.

Fair, Clear, and Non-Misleading Communication

Marketing content must align with the knowledge level of its target audience. Retail-focused material should avoid technical jargon and ensure consistency with regulatory documents. Claims must be backed by verifiable sources, with balanced and accurate representations of fund features. Misleading comparisons or overpromising are strictly prohibited.

Cost, Performance, and Sustainability

Cost implications must be detailed, showing their effect on returns, particularly in foreign currency contexts. Performance claims should span 5–10 years and avoid unrealistic forecasts. Sustainability aspects must be truthful, matching the fund’s strategy without exaggeration.

The ESMA guidelines aim to enhance investor trust by ensuring marketing communications are transparent, balanced, and closely tied to regulatory disclosures.

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