Private placement rules and law in Norway

The Norwegian Alternative Investment Funds Act (the “AIFM Act”) and Alternative Investment Funds Regulations (the “AIFR”) implements the AIFMD in Norwegian law. None of the Norwegian AIFM rules define the term “private placement” and there is no general private placement exemption under the rules in the sense that an AIF may be marketed without prior approval. Accordingly, AIFs may not be marketed in Norway unless and until a marketing approval has been obtained from the Financial Supervisory Authority of Norway (the “FSAN”) in accordance with the AIFM Act.

Consequently, an AIFM is required to submit an application to the FSAN for permission to market any AIF which falls outside the passporting regime of the AIFMD. The AIFM may market the AIF when the FSAN has given its approval. This usually takes approximately 30 days from the date of payment of the fee invoice, provided that the application is satisfactory.

The AIFM Act section 6-4 and 6-5 provides the various requirements which must be satisfied by an EEA or non-EEA AIFM to market EEA/non-EEA AIFs.

Marketing of AIFs to non-professional investors can only be conducted by authorised EEA AIFMs and is regulated by Chapter 7 of the AIFM Act.

An authorised EEA AIFM applying to the FSAN to market a non-EEA (or “third country”) AIF, or an EEA feeder AIF of a third-country master AIF to professional investors in Norway must confirm that the following conditions are satisfied:

• The AIFM complies with the majority of the requirements of the AIFM Act;
• To the extent applicable, the AIFM does what is required to make payments to investors in Norway, redeem fund interests and give the information required pursuant to its home state regulations;
• Appropriate co-operation arrangements are in place between the regulatory authority of the AIF’s home state and Norway; and
• The AIFs home state is not listed as a NCCT by FATF.

The FSAN may set additional conditions for approval.

A non-EEA AIFM submitting an application to the FSAN to market any AIF (whether EEA or non-EEA) to professional investors in Norway must confirm that the following conditions are satisfied:

• The AIF and management of the AIF is subject to appropriate supervision in its home state and complies with applicable requirements to manage the AIF in the home state;
• The AIFM complies with certain transparency requirements under the AIFM Act (Chapter 4);
• Appropriate co-operation arrangements are in place between the FSAN and the regulatory authority of the AIF’s/AIFM’s home state;
• To the extent applicable, the AIFM does what is required to make payments to investors in Norway, redeem fund interests and give the information required pursuant to its home state regulations; and
• The country where the third country AIFM and, if applicable, the third country AIF is established must not be listed as a NCCT by the FATF.

The FSAN may set additional conditions for approval.

An authorised Norwegian or EEA AIFM applying to the FSAN to market any AIF (whether Norwegian, EEA or non-EEA) to non-professional investors in Norway must provide the following information:

• A business plan identifying the AIF and where the AIF is established;
• Information about the AIF available to potential investors, including information set out in Section 4-2 of the AIFM Act;
• A Key Investor Information Document as set out in Section 7-2 of the AIFM Act and Chapter 7 of the AIFR;
• Confirmation that the AIF can be marketed to non-professional investors in its home state; and
• An outline of planned marketing and sale of the AIF, including procedures for conduct of a suitability test for each investor.

For non-EEA AIFs, the conditions set out in Section 6-4 (see above) must also be complied with.

Additionally, all AIFM’s seeking to market an AIF to non-professional investors in Norway must be a member of an independent, external complaints board.

The FSAN may set additional conditions for approval.

Only EEA AIFMs may pre-market their EEA-established AIFs in Norway. Non-EEA AIFs can thus only be marketed under the private placement regime set out above. For an overview of the pre-marketing rules applicable to EEA AIFs, please consult the CMS guide to passporting – rules on marketing alternative investment funds.

There is a limited access to conclude fund subscriptions/placements based on reverse solicitation from professional investors under Norwegian law, i.e subscriptions made solely at the initiative at the professional investor without any prior solicitation from the AIFM. The requirements of a marketing approval for the AIF will not apply in these instances.

The FSAN has stated that reverse solicitation would be allowed under the following circumstances:

• the subscription is solely made at the investor’s initiative and without the AIFM, or any party acting on the AIFM’s behalf, having marketed the AIF to the investor; and
• the entire process towards subscription, and not only the initial contact, is made at the investor’s initiative.

This exception is only open to professional investors, as defined in MiFID Annex II (“per se professional investors”), and reverse solicitation may under no circumstances be relied upon from non-professional investors.

If marketing is carried out in contravention of the Norwegian private placement regime, the FSAN may require the AIFM to make the necessary corrections or cease its marketing operations. The FSAN may also withdraw the marketing approval.

Unlawful marketing is also a criminal offence subject to imprisonment for a term not exceeding twelve months or a fine, or both.

Norway charges one-off fees for private placements in Norway. Fees for notifications and marketing applications are set by regulation between NOK 5,000 and NOK 30,000, and annual fees are set at up to NOK 10,000 per fund. The fee levels applicable as of publication are:

• Applications under the private placement rules for third-country AIFs managed by EEA AIFM (AIFMD Article 36/NO AIF Act section 6-4): NOK 10,000;
• Applications under the private placement rules for third-country AIFs managed by third-country AIFMs (AIFMD Article 42/NO AIF Act section 6-5): NOK 15,000;
• Annual fee per manager: NOK 7,000.

Norwegian law allows for private placements in financial instruments issued by non-AIFs. However, generally any public offering of securities is subject to a prospectus requirement in accordance with the Prospectus Regulation, if the offering is not comprised by one of the many exemptions to the prospectus requirement