Understanding the Regulatory Boundaries.

The concept of “fundraising” in private capital markets is commercially distinct from the legal constructs of “marketing” and “pre-marketing” under the AIFMD. Marketing under Article 4(1)(x) of the AIFMD refers to “a direct or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF to or with investors domiciled in the Union”. By contrast, “pre-marketing” involves the sharing of information or draft documents in advance to gauge interest in a not-yet-notified AIF (Directive (EU) 2019/1160). Crucially, the legal framework differentiates these activities from broader commercial fundraising. While AIFMD rules focus on specific conduct carried out by authorised managers in respect of a specific fund product, private equity sponsors may conduct preliminary discussions without triggering regulatory obligations if they instead focus on target strategies.

Many private capital arrangements begin as informal frameworks or concepts. These can include proposals for co-investment, thematic funds, managed accounts, or strategic platforms that may or may not later be formalised into AIFs. If discussions take place between commercial counterparties before an AIF is legally identified, and if they are led by a sponsor unaffiliated with a putative AIFM, they typically fall outside the AIFMD’s scope. Such discussions are more akin to early commercial engagement and not marketing or pre-marketing within the meaning of EU law.

Marketing and Non-Marketing Activities.

Beyond the formal definitions of marketing and pre-marketing, private equity sponsors often engage in broader strategic dialogues designed to explore potential investment themes, discuss market trends, or sound out general investor appetite for certain asset classes. These interactions, provided they do not relate to specific AIFs, typically fall outside the direct purview of AIFMD. Such activities might include participation in industry conferences, high-level discussions with institutional investors about their investment mandates, or presentations on macroeconomic outlooks and sector-specific opportunities. The key differentiator is the absence of any fund-specific materials, proposed terms, or other teasers to invest in a particular AIF, whether existing or proposed.

MiFID II and Private Equity Interests.

MiFID II applies to the provision of investment services in relation to “financial instruments,” including transferable securities (Art. 4(1)(15) MiFID II). This requires the existence of financial instruments. The European Commission and ESMA have clarified that interests in private equity limited partnerships are typically not considered transferable securities because they are not negotiable on the capital markets (cf. EC MiFID Q&A; ESMA Opinion 2015/ESMA/1125). The key criterion is whether the partnership interest can be freely transferred and traded. In most private equity structures, transfers require General Partner (GP) consent, lack standardised pricing or settlement mechanisms, and are not listed. In contrast to shares in listed companies or units in UCITS, partnership interests are structured to prevent free-market trading. As a result, they fall outside the scope of MiFID’s regulatory regime.

The intentional design of private equity limited partnership interests to restrict transferability – often embedded in the partnership agreement through clauses requiring GP consent, rights of first refusal, or restrictions on assignment – reinforces their non-negotiable character and differentiates them from freely traded securities. This structural characteristic is fundamental to the long-term, illiquid nature of private equity investments and is a key factor in their exclusion from MiFID II’s scope.

Nonetheless, caution is warranted. Some regulators may still focus on the commercial activity rather than the instrument, particularly where advisory or intermediation services are involved. However, MiFID II is principally concerned with the regulation of firms that provide investment services to third parties or operate a business of dealing in financial instruments on behalf of others. Where a GP is discussing or offering interests in its own fund directly to potential investors, it is acting as principal and not as an intermediary or adviser for third parties. In this context, the GP is not providing investment services to others for remuneration, nor is it carrying on a business of dealing in financial instruments as a service. As a result, and provided that the fund interests in question are not transferable securities, MiFID II authorisation is not required for the GP’s own fundraising activities. This contrasts with the position of placement agents or advisers, who may be subject to MiFID II where they provide regulated services to third parties in connection with fund interests.

GP-Led Fundraising

Private equity sponsors often engage in strategic dialogue with potential investors before launching a formal AIF. These early-stage conversations – focused on thematic strategies, sectoral trends, or co-investment vehicles – do not amount to pre-marketing if conducted outside the context of a defined AIF by a non-AIFM entity (e.g., the GP or the sponsor itself). This distinction is crucial legally. The involvement of an AIFM may immediately bring the discussion within scope. By contrast, a GP, acting independently of the AIFM and before AIF formation, and in a non-trading context, may discuss general concepts and market outlooks with potential limited partners without triggering AIFMD requirements. These discussions are often framed as preliminary market research or relationship-building rather than regulated marketing or pre-marketing.

Indeed, the practice of sounding out institutional appetite before incurring the costs of AIFM appointment or regulatory notification is commercially vital. Guidance from leading regulators supports this interpretation, permitting high-level conversations that do not constitute a contractual offering or actionable invitation to invest. In these cases, disclaimers and the absence of subscription documentation are critical. Materials such as teasers, summaries, or conceptual frameworks should be explicitly labelled as “not a solicitation”. Effective disclaimers should clearly state that the materials shared are for informational purposes only, do not constitute an offer to sell or a solicitation of an offer to buy any securities or interests, and are not intended to be relied upon for investment decisions. They should also indicate that no regulated entity is involved in marketing at this stage.

Reverse Solicitation: Requirements and Evidence

Reverse solicitation arises where the investor initiates contact with the AIFM or sponsor without any prior solicitation or marketing (Recital 70, AIFMD; EC AIFMD Q&A, 2012). As clarified in EU guidance and jurisprudence, genuine investor-led engagement does not constitute marketing; however, reverse solicitation may be challenged on abuse grounds. Regulators scrutinise whether the apparent initiative of the investor was in fact triggered by subtle or indirect promotional activities. The burden of proof for genuine reverse solicitation typically rests with the AIFM or sponsor, which must maintain a clear audit trail. Firms must be able to demonstrate that the investor’s initiative was truly independent.

Four principles derived from EU guidance and French enforcement precedents (e.g., AMF sanctions 2021/09 and 2022/03) illustrate the requirements:

1. Initiative and audit trail. Evidence must show that the investor approached the manager without any preceding communication intended to induce investment. Email chains, timestamps, and internal records are essential.

2. Sophistication and parity. The investor should be a sophisticated counterparty, typically professionally advised, with the ability to assess opportunities independently. Reverse-solicitation claims involving individual clients attract greater scrutiny.

3. Scale and exclusivity. Reverse solicitation must occur on a limited and case-specific basis. Mass-distributed materials that prompt “unsolicited” responses may indicate circumvention.

4. Substance over form. Authorities evaluate the contextual realities of the interaction. Industry-sector engagement (rather than private wealth outreach) typically provides greater security for sponsors.

These principles are echoed in the ESMA Guidelines on marketing communications (ESMA34-45-1272) and national guidance issued by regulators including the AMF and BaFin. Notably, the French AMF has penalised firms where reverse solicitation was claimed based on private investor responses to widely distributed newsletters or event invitations. Subtle inducement is likely to be viewed as circumvention.

Practical Steps for Fund Sponsors

To explore investor appetite while avoiding premature AIFMD or MiFID II exposure, sponsors should adopt structured practices:

• Structure discussions at the GP or sponsor level, without AIFM involvement.

• Avoid distributing fund-specific documents. Materials should only be made available through controlled portals where parameters can be pre-agreed.

• Maintain clear audit trails of investor inquiries, including timestamps and correspondence.

• Apply disclaimers clarifying that any materials are not offers or invitations to subscribe.

• Ensure that reverse solicitation is verifiably investor-led and not the result of disguised marketing.

• Limit outreach to known professional investors active in the relevant market sector.

• Develop a clear internal policy distinguishing early-stage engagement from formal marketing and pre-marketing. This policy should outline permissible discussions, materials, and communication channels.

• Train investor relations and deal teams on EU marketing rules and the risks associated with implied solicitation.

• Consider implementing cooling-off periods between unsolicited contact and the provision of regulated offering documentation.

Looking Ahead: AIFMD II and MiCA

While the principles outlined above remain foundational, the European regulatory landscape is evolving. Fund sponsors should monitor developments that may affect future fundraising strategies:

• AIFMD II implementation. AIFMD II is currently being transposed into national laws across EU Member States, with full implementation expected by 16 April 2026. While the core tenets of marketing and reverse solicitation remain consistent, AIFMD II may introduce nuanced changes in application.

• Digital assets. The Markets in Crypto-Assets Regulation (MiCA) introduces a dedicated framework for crypto-assets. For sponsors exploring tokenised private equity interests or digital-asset strategies, MiCA’s approach to reverse solicitation is notably stricter, including a one-month validity period for unsolicited requests and more granular definitions of financial services.

Conclusion

Private equity fundraising in the EU sits within a complex regulatory landscape. By maintaining a clear overview of the fundraising process like that below, sponsors can reduce regulatory burden while ensuring legal compliance. Adhering to structured evidentiary and procedural safeguards enables fund sponsors to conduct early-stage dialogue that supports product formation without crossing costly legal thresholds prematurely. A strategic approach provides sponsors with the flexibility to gauge market demand and refine their strategies before formalising an investment product. Conversely, an overly rigid approach may result in avoidable expenses being incurred over the life of a private fund.