Finland

Summary of private placement provisions for fund interests (if applicable)

The Alternative Investment Fund Managers Act (Fi: laki vaihtoehtorahastojen hoitajista, 162 / 2014, the “AFMA”), implementing the AIFMD in Finland, entered into force on 15 March 2014. Since the entry into force, the AFMA has been complemented by several decrees and regulations of the Finnish Financial Supervisory Authority (“FIN-FSA”).

As explained below, the entry into force of the AFMA fundamentally changed the private placement regime in Finland. The Finnish private placement exemptions, which previously covered e. g. the offering of non-UCITS funds to professional investors, are no longer available as such. However, with respect to Non-EEA AIFMs wishing to market their funds to professional investors in Finland, Finland has not implemented any national requirements that go beyond the requirements set out in Article 42 of the AIFMD.

Definition of private placement and the relevance of type of funds/ investors

There is no exact definition of a private placement in Finnish legislation, but the term is generally understood to mean an offering of securities or other financial instruments that is exempted from:

• in case of transferable securities, the requirement to publish a prospectus, and/ or
• in case of funds, the requirement to seek a licence of an asset manager / a fund management company and to register the fund to be marketed with the FIN-FSA or, alternatively, the requirement to use the European passporting regime to market the funds (passporting under the UCITS Directive or the AIFMD).

Private placement possibilities in respect of transferable securities

In accordance with the Prospectus Regulation (EU) 2017 / 1129 and the Finnish Securities Markets Act (746 / 2012, the “FSMA”), if the fund interests qualify as transferable securities, there is no obligation to publish a prospectus if the fund interests are:

• offered solely to qualified investors as defined in the Prospectus Regulation;
• offered to fewer than 150 natural or legal persons other than qualified investors;
• are to be acquired for a consideration of at least EUR 100,000 per investor with regard to an offer or in portions of at least EUR 100,000 in nominal or counter value;
• offered so that the total consideration (i.e. the aggregate purchase price of the securities) in the European Economic Area is under EUR 8,000,000 calculated for a 12-month period. 

In situations referred to above, the private placement exemption does not apply if the distribution of the securities to the final investors does not meet the requirements of the exemption.

Private placement regime under the AFMA

The entry into force of the AFMA fundamentally changed the private placement regime previously available to foreign non-UCITS funds and to all funds established as closed-ended funds and qualifying as transferable securities within the meaning of the FSMA. Under the pre-AFMA regulatory framework, closed-ended funds could traditionally take advantage of the private placement exemptions provided in the FSMA (see above). Due to the entry into force of the AFMA, the prospectus exemptions provided in the FSMA have partly lost their significance, as offerings relating to all types of non-UCITS funds, whether open-ended or closed-ended, are now subject to the extensive requirements of the AFMA.

The AFMA makes authorisation (or registration) mandatory for all Finnish AIFMs managing or marketing AIFs in Finland. The main principle under the AFMA is that if a fund does not qualify as an UCITS, the fund constitutes an AIF and, consequently, the manager of such a fund is required to comply with the requirements of the AFMA. Due to the broad definition of an AIF, a wide range of investment vehicles previously exempted in private placements, or alternatively, unregulated by default, has been brought into the scope of regulation and supervision in Finland. Under the AFMA, AIFMs are subject to the authorisation/ registration requirements irrespective of whether the fund interests are offered to professional or non-professional investors. Thus, under the AFMA, there are no private placement exemptions available based on investor classification. If an AIFM intends to market EEA AIFs under its management also to non-professional investors in Finland, it must meet certain further requirements set out in the AFMA (including the requirement to prepare and make available a key investor information document).

EEA AIFMs

EEA AIFMs can passport their licence into Finland in accordance with the AIFMD passporting regime to manage AIFs in Finland (Article 33 of the AIFMD). EEA AIFMs may also market EEA AIFs in Finland directly on a cross-border basis through the notification procedure (Article 32 of the AIFMD).

As regards Brexit, there is no legislative initiative proposing temporary exemption for the marketing by UK AIFMs of EEA AIFs into Finland under the marketing passport as prescribed in Article 32 of the AIFMD. This would mean that UK AIFMs will have to comply with provisions of AFMA applicable to Non-EEA AIFMs when marketing units in an AIF that is established either in an EEA State or a Non-EEA State after a no-deal Brexit.

Marketing of AIFs by Non-EEA AIFMs

The way a Member State implements the provisions of the AIFMD governing the conditions for marketing of AIFs by Non-EEA AIFMs (Article 42 of the AIFMD) could be construed as a national private placement regime of sorts. In this respect, the rules of the AFMA do not go beyond the AIFMD, i.e. there is no “gold- plating” in Finland regarding the implementation of Article 42.

However, if a Non-EEA AIFM intends to market AIFs in Finland, a marketing notification must be submitted to the FIN-FSA in order for the FIN-FSA to assess whether the Non-EEA AIFM fulfils the requirements to market in Finland. Marketing may only be commenced once the Non-EEA AIFM has received an acknowledgement thereof from the FIN-FSA. In Finland, Non-EEA AIFs managed by a Non-EEA AIFM may only be marketed to professional clients.

Offering of UCITS funds

Offering of UCITS funds is not subject to any private placement exemptions since the FIN-FSA considers that UCITS funds are always available to the public.

Summary

There are no private placement exemptions available for an offering of fund interests in Finland because, from a Finnish law perspective, all funds offered in Finland will be classified as either UCITS funds or AIFs. A lighter regulatory regime is available for EEA AIFMs whose total assets under management fall below EUR 500m (or EUR 100m if leverage is used to acquire assets).

For EEA AIFMs there is a passporting regime available as provided for in the AIFMD.

Non-EEA AIFMs intending to market fund interests in Finland must obtain prior approval from the FIN-FSA. Non-EEA AIFMs may market Non-EEA AIFs in Finland without any additional requirements to those of the AIFMD. Non-EEA AIFs managed by a Non-EEA AIFM may only be marketed to professional clients.

Other forms of possible placement options for fund interests outside fund regulations

The AFMA does not cover and therefore exempts reverse solicitation (i.e. when investors themselves contact an AIFM and the AIFM presents various investment opportunities to the investor) under certain circumstances. The AFMA includes a specific provision explaining that it does not seek to affect the right of investors to invest in Non-EEA funds of their choosing.

Consequences of non-compliance with placement regimes for fund interests

The AFMA imposes on AIFMs a liability for damages resulting from wilful or negligent breaches of the obligations provided in the AFMA and related regulations. An AIFM and a professional client may, however, contractually deviate from the liability regime provided in the AFMA.

Pursuant to the AFMA, a person engaged in unauthorised marketing and offering of fund interest may become subjected to administrative and criminal sanctions.

The FIN-FSA may impose administrative fines for failures to disclose certain information to investors such as information on leverage. An administrative penalty may be imposed for breaches of the prohibitions against provision of untrue or misleading information and for breaches of periodic disclosure obligations. A person that manages or markets AIFs without authorisation faces criminal liability and sanctions.

Private placement rules for non-fund investments available

AFMA’s exemptions relating to non-fund investments are compatible with the AIFMD. These include investments in or by:

• companies belonging to the same group;
• business that does not qualify as collective investment;
• joint ventures;
• holding companies;
• employee pension insurance schemes and companies;
• public sector entities such as the ECB, IMF, central banks, governments etc.
• employee participation schemes; and
• special purpose vehicles.

These non-fund investments are normally subject to specific regulations, such as legislation governing pension insurance schemes and employee participation. If the investment takes the form of a transferable security or another financial instrument, it will be covered by the FSMA and regulations on investment services. To the extent a non-fund investment is not captured by any of these regulations, it will be exempted from the regulatory requirements and may be offered on a private placement basis or to members of the public. Since the definitions of an AIF, a transferable security and a financial instrument cover collectively most conceivable forms of fund interests, a private placement of a non-fund should be a relatively rare occurrence.