ESMA publishes consolidated overview of rules on cross-border distribution of investment funds

RegCORE Client Alert | Capital Markets Union

QuickTake

On 21 August 2025, the European Securities and Markets Authority (ESMA) published an 83-page consolidated overview of rules and sources relating to the cross-border distribution of investment funds.Available here.Show Footnote The overview covers the national rules, expectations as well as details on fees and charges of the national competent authorities (NCAs) of the 27 EU Member States as well as the three EFTA countries (Iceland, Liechtenstein and Norway). The consolidated overview applies to the marketing requirements, licensing and fees associated with fund management activities relevant to both AIFs and UCITS. While it should be viewed as a living document that will be highly relevant for those engaging in cross-border distribution of investment funds, it should also be noted that in some instances national rules/details might change faster than the consolidated overview is updated.

ESMA was mandated by the EU’s Cross-Border Distribution of Investment Funds Regulation and its related Directive (collectively the CBDF Rules) to publish the consolidated overview. While the CBDF RulesAs a recap, the CBDF Rules introduced the following harmonised elements by way of an: 
•   EU Directive: (i) pre-marketing of AIFs, (ii) provision of local facilities for AIFs and UCITS being marketed to retail investors, (iii) a process to de-notify marketing of an AIF or UCITS in a host EU/EFTA Member State, (iv) alignment of certain notification in respect of marketing an EU AIF or UCITS in a host EU/EFTA Member State; and
•   EU Regulation: (v) requirements around marketing communications (vi) verification of marketing communications, and (vii) creation of a central database for publication of (a) national marketing requirements, (b) fees and charges and (c) a list of AIFs, UCITS and their managers.Show Footnote already harmonises and in parts simplifies compliance implications, differences still apply in the EU/EFTA Member States. Those differences will need to be reflected in operations and documentation used to carry out cross-border distribution of investment funds across the EU/EFTA. Different rules apply to distribution from outside of the EU/EFTA into the EU/EFTA.

This Client Alert should be read together with further analysis in a standalone series analysing developments shaping the application of the CBDF Rules and the cross-border distribution of investment funds more broadly, readers may wish to consult country specific thought leadership available from our PwC Legal Financial Services Teams based in all EU and EFTA countries.

Key takeaways from the consolidated overview

ESMA’s consolidated overview aggregates national rules, notification procedures, marketing requirements and fee structures, aiming to facilitate cross-border activities while ensuring investor protection and regulatory oversight. For regulated firms, these guidelines are both an opportunity and a compliance challenge, as they must navigate both harmonised EU-level requirements and persistent national divergences.

In terms of general observations, common to all EU/EFTA Member States, these can be summarised as per the below. Some of these should be familiar concepts, but the consolidated overview aims to highlight these more clearly:

1.   Notification and passporting procedures

• All EU/EFTA Member States require a notification procedure (i.e., “cross-border marketing passporting”) for cross-border marketing of UCITS and AIFs, typically involving the relevant home state NCA transmitting a notification letter and supporting documents to the relevant host state NCA.
• The notification must include key documents such as prospectus, articles of incorporation, annual and half-yearly reports, and the Key Investor Information Document (KIID) or equivalent.
• Marketing can generally commence once the host state NCA confirms receipt or, in some cases, after a set period.

2.   Marketing communications

• Marketing materials must be fair, clear and not misleading, and must be clearly identifiable as marketing communications.
• The CBDF’s Rules and ESMA Guidelines set minimum standards for content, risk disclosure and prominence of information.
• Most EU/EFTA Member States do not require prior approval of marketing materials, but ex-post supervision is common, with authorities empowered to require withdrawal or amendment of non-compliant materials.

3.   Facilities for investors

• UCITS and, in some cases, AIFs must provide “facilities” in the host EU/EFTA Member State to process subscriptions, redemptions, and provide information to investors.
• These facilities can often be provided electronically or via third parties, but must be accessible in the local language or another language accepted by the host authority.

4.   Language requirements

• The KIID and key investor disclosures must be provided in the official language of the host EU/EFTA Member State or another language accepted by the NCA. 
• Other documents may be accepted in English in many jurisdictions, but this is not universal.

5.   De-notification procedures

• There is a harmonised process for ceasing marketing in a host EU/EFTA Member State, including requirements to make a blanket offer to repurchase or redeem units and to notify investors and authorities.

Despite harmonisation efforts, significant national divergences in the CBDF Rules in their application remain, particularly in the following areas:

a.   Prior approval of marketing communications

• Some EU/EFTA Member States (e.g., France, Portugal, Belgium for public offers) require ex-ante approval of marketing materials, especially for retail-targeted communications.
• Others (e.g., Germany, Ireland, the Netherlands) rely on ex-post supervision and do not require prior submission.

b.   Marketing to retail vs. professional investors

• The threshold for marketing AIFs to retail investors is high in most EU/EFTA Member States, often requiring additional authorisation or compliance with national product rules.
• Some jurisdictions (e.g., Germany, Italy, Spain) have specific regimes for “semi-professional” or “qualified” investors, with tailored requirements. 
• In many countries, only certain types of AIFs (e.g., NIFs in Bulgaria, specific AIFs in Croatia) can be marketed to retail investors, and only after meeting stringent local requirements.

c.   Language and translation requirements

• While the KIID must generally be in the local language, some EU/EFTA Member States (e.g., the Netherlands, Finland, Sweden) accept English for professional investors. 
• Others (e.g., Latvia, Lithuania, Bulgaria) require full translation of key documents for retail distribution.

d.   Facilities for investors

• The implementation of the requirement to provide facilities for investors varies: some countries require a local physical presence or agent, while others accept electronic or cross-border solutions.

e.   Reporting and ongoing obligations

• Ongoing reporting requirements (e.g., statistical returns, updates to documents) differ, with some EU/EFTA Member States imposing additional obligations on foreign managers (e.g., Spain, the Netherlands).

f.   Fees and charges

• The structure, frequency, and amount of regulatory fees for cross-border marketing differ widely, impacting the cost of market entry and ongoing operations.

g.   Advertising and consumer protection laws

• National consumer protection, advertising, and unfair commercial practices laws apply in addition to sectoral fund rules, and their interpretation and enforcement can vary significantly.

These divergences also arise in part due to both the UCITS Directives and AIFMD being “minimum harmonisation” directives. This means that while they establish baseline requirements, EU/EFTA Member States are free to impose stricter or additional rules in their national legislation. EU/EFTA Member States often supplement the Directives with local consumer protection rules, disclosure obligations, and operational requirements, reflecting national priorities and regulatory philosophies. As a result, the same EU Directive can lead to different regulatory outcomes in different countries. For example:

• Austria: The Investment Fund Act 2011 (InvFG 2011) and the Alternative Investment Fund Managers Act (AIFMG) implement the UCITS Directives and AIFMD, but Austria imposes additional requirements, such as restricting registered AIFMs from marketing to retail investors or engaging in cross-border activities.
• Germany: The German Capital Investment Code (KAGB) transposes the Directives, but introduces a unique investor classification system (retail, semi-professional, professional) and specific notification and publication obligations for marketing to each group. The semi-professional category is subject to specific rules, such as a minimum investment threshold (e.g., EUR 200,000) and a written assessment of knowledge and experience by the AIFM. This category does not exist in the original EU Directives, creating a unique compliance consideration for fund managers targeting German investors.

Moreover, the UCITS Directives and AIFMD provide general definitions (e.g., “retail investor,” “professional investor”), but EU/EFTA Member States often refine or expand these definitions in their own laws. This may lead to inconsistencies in who qualifies as a retail or professional investor and what protections or requirements apply:

• Germany: Introduces a “semi-professional” investor category, with its own set of rules, not found in the original Directives.
• Belgium: Distinguishes between public offers and private placements, with different marketing requirements for each, and imposes additional conditions for public offers to retail investors. The definition of what constitutes a “professional” investor, or a “public offer” may differ from other EU/EFTA Member States.

Fund managers must tailor their marketing strategies and documentation to fit the investor categories of each target country. A product that can be marketed to “professional investors” in one country may not be eligible for the same treatment elsewhere, or may require additional steps to reach “semi-professional” or “qualified” investors.

Equally, some EU/EFTA Member States use their (national law) discretion to impose outright restrictions or grant exemptions not contemplated by the Directives:

• Austria: Registered (as opposed to licensed) AIFMs are barred from marketing to retail investors or engaging in cross-border activities.
• Lithuania: Imposes strict requirements for AIFs marketed to retail investors, including compliance with national rules on investment strategy and disclosure, and only allows marketing to retail investors if the AIF is also marketed to retail investors in its home EU/EFTA Member State.
• Poland: Does not permit non-EU AIFMs or AIFs to operate in the country at all, regardless of the investor classification and harmonised framework.

The eligibility of investors to access certain investment funds varies widely. Fund managers must assess not only the classification of their target investors, but also whether their products are eligible for marketing to those investors under local law. This can result in the need to create multiple share classes, prospectuses, or even separate fund vehicles to comply with local requirements.

Strategic and operational implications for regulated firms

While the ESMA has advanced the harmonisation of cross-border investment fund distribution, significant national differences persist, particularly in the areas of marketing communications, retail investor access, language requirements, and ongoing obligations.

In addition to the items raised above, regulated firms must, regardless of harmonisation aims, still adopt a jurisdiction-by-jurisdiction approach, supported by local legal expertise, to ensure compliance and to optimise their cross-border distribution strategies. Some key strategic and operational implications are set out below for consideration:

• The harmonised notification/passporting process is a procedural gateway, not a harmonisation of all requirements: it enables an investment fund to access a host market, but it does not harmonise all substantive requirements for marketing in that market.
• Once the notification is complete, the investment fund must still comply with the host EU/EFTA Member State’s national rules on marketing communications, language, investor facilities, and, in some cases, product features. In most instances, fund managers must develop and maintain multiple sets of marketing materials, each tailored to the investor classification and regulatory expectations of the target jurisdiction. This increases operational complexity and cost.
• The KIID or equivalent must almost always be in the local language for retail marketing, regardless of the harmonised notification.
• Thus, even after successful cross-border marketing passporting, firms must adapt their marketing approach to local requirements, in particular for retail clients. Moreover, the notification regime distinguishes between professional and retail investors, but national rules on who qualifies as a retail investor, and what products may be offered to them, may differ.
• The harmonised regime requires that facilities for investors (e.g., for subscriptions, redemptions, information) be provided in the host EU/EFTA Member State. National implementation varies: some require a local agent or physical presence, while others accept electronic or cross-border solutions. The notification process does not override these local requirements; firms must ensure compliance post-passporting.
• The harmonised notification process does not harmonise ongoing reporting or supervisory obligations. Host EU/EFTA Member States may impose additional reporting (e.g., statistical returns in Spain, updates to documents in the Netherlands), and these must be observed after passporting.
• The process for ceasing marketing in a host EU/EFTA Member State is harmonised (e.g., blanket offer to repurchase units, notification to investors and authorities), but the practical steps and documentation required may differ locally.

The following examples illustrate some jurisdiction-specific approaches as highlighted in ESMA’s consolidated overview – while there are some market-specific workarounds, the following may be noteworthy:

• Austria: Registered AIFMs are not permitted to market any AIFs to retail investors or to engage in cross-border marketing or management. Only licensed AIFMs may market to retail investors, and even then, specific national rules apply.
• Belgium: Marketing to retail investors is only allowed under certain conditions. For example, AIFs can be marketed to retail investors without a public offer if done via private placement as defined by Belgian law. Public offers require registration on a specific list and compliance with additional conditions.
• Germany: The legal framework distinguishes between retail, semi-professional, and professional investors. Marketing to retail investors requires a more rigorous notification procedure and compliance with additional publication and disclosure obligations.
• Finland: EEA AIFMs intending to market AIFs to non-professional (retail) investors must submit a direct notification to the Finnish Financial Supervisory Authority (FIN-FSA) and obtain approval before commencing marketing. Marketing to professional investors follows a different, less stringent process.
• Ireland: An AIF from another jurisdiction must apply in writing and receive a letter of approval from the Central Bank before marketing to retail investors. There are additional requirements for prospectus content and marketing materials.
• Lithuania: Marketing of AIFs to retail investors is only permitted after obtaining specific authorisation from the Bank of Lithuania, and the AIF must comply with requirements applicable to national retail AIFs, including investment strategy and disclosure rules.
• Poland: Marketing of EU AIFs to retail investors is subject to the rules of the Prospectus Regulation and national public offer laws. Non-EU AIFMs or AIFs are not permitted to operate in Poland at all.
• Portugal: The marketing of both UCITS and AIFs to retail investors requires prior approval from the CMVM, and the process is distinct from that for professional investors.

Ultimately, failure to comply with national requirements post-passporting can result in regulatory action, including withdrawal of marketing rights or sanctions, even if the notification process was correctly followed.

Outlook

ESMA’s consolidated overview is helpful for firms in navigating the current set of requirements and jurisdiction-specifics. It also serves to call out, perhaps quite publicly, the areas and inefficiencies where EU policymakers may want to push through even greater harmonisation to ensure that investment funds can be fully marketed within the EU’s Single Market for financial services free from the remaining residual barriers. Until such further harmonisation arises, firms will want to consider how to design their cross-border investment fund distribution efforts in a manner that meets compliance, but allows for a modular approach to base documentation to reflect jurisdiction specifics.

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