New Markets, New Rules: A Practical Checklist

Expanding your reach into a new jurisdiction can seem overwhelming at first, bringing complex regulatory and operational challenges.

Whether you are responding to reverse enquiries from investors from jurisdictions that have not yet been tried and tested or are proactively entering new markets, there are a set of core questions that should help you get on the right track to analysing what strategy is appropriate for marketing your financial products and services and how to navigate the regulatory and compliance risks.

Assessing the regulatory perimeter

Every jurisdiction has its own set of rules and guidelines relating to the offer of financial products and services so a key point to determine from the outset is where the rules “bite” in a particular jurisdiction and/or whether your activities can be structured within an available exemption/exclusion. In addition to getting a handle on how favourable the jurisdiction’s regulatory environment is, you also need to determine whether there are any overarching regional considerations to be aware of. For example, does your target jurisdiction have any cross-jurisdictional arrangements that you may be able to benefit from that would streamline your burden of compliance?

Legal certainty is a journey, the checklist is the map

Below is a checklist of some of the core questions to ask yourself at the outset, the responses to which often determine your strategy and the way your activities are structured.

What are you marketing?

Depending on the type of product/service, a notification, registration or filing requirement may apply.

Who is doing the marketing?

What is the status of the entity conducting the marketing/distribution and can it benefit from any passporting or recognition arrangements?

What is your marketing strategy?

Where the position is particularly restrictive when actively marketing, is the regime more permissive when responding to reverse enquiries? See our article on Responding to Reverse Enquiries in the EU for best practice guidelines to bear in mind when responding to reverse enquiries from investors in the EU. Be aware that in some jurisdictions pre-existing relationships with a client may make it harder to prove the genuine nature of a reverse enquiry.

What is your marketing method?

Cross-border versus onshore activities: In some jurisdictions there is a distinction to be made in the treatment between onshore and remote activities. You should check whether attendance at fly-in meetings or any onshore activities, even where requested by an investor, cause particular difficulties or even negate a reverse enquiry.

Should activities be structured to ensure they only are carried on from offshore and if so, is there regulator guardrails on this important onshore/offshore distinction.

Who are you marketing to?

The level of sophistication of investors varies and often a jurisdiction’s regulatory regime will have a layered approach to the protections that apply to them. If any exemptions to licensing/regulatory restrictions or tolerated practices are available, check whether these are dependent upon the status of the investor and if so, how can you best demonstrate that any requirements have been complied with.

What is at stake if it goes wrong?

Be clear on what penalties/sanctions are in play. Even though examples of public enforcement actions against foreign providers of financial products and services remain relatively rare, regulators are becoming increasingly open about their approaches to enforcement and areas of focus. See our article on Examples of Penalties for Non-Compliance for recent examples and trends regarding enforcement for breaching financial services marketing rules, as well as enforcement actions relating to crypto assets.

Tracking change with aosphere

If the who/what/where/how of marketing and distribution strategies wasn’t complicated enough, it is complicated further by the constant shift in the global regulatory landscape. The information on our Rulefinder Marketing Restrictions and Marketing Restrictions – Asset Management services is updated daily by our dedicated team of experts, so you always have the latest position at your fingertips without having to incur the time and hassle of local lawyers. Our services provide a comprehensive analysis of the legal and regulatory issues which impact how to structure your cross-border marketing and distribution activities.