Start with the distribution model

The starting point is a clear picture of the intended distribution model. Which AIFs and jurisdictions are in scope? Who are the target investors? Which channels will be used, and can the distributor appoint others? Just as importantly, who sets the marketing strategy, approves communications and manages investor relationships and subscription flows? The agreement should answer these questions based on the parties’ real roles, rather than relying on labels such as “placement agent”, “distributor” or “introducer”.

While arrangements with distributors acting on behalf of an AIFM may fall within the AIFMD delegation framework, marketing by an eligible regulated distributor in its own name may sit outside of it, but may still be useful to manage contractual, operational, reputational and investor-protection risks. This distinction matters, but it should not be viewed in isolation. The wider analysis still needs to take account of cross-border marketing rules, local placement regimes, MiFID or other sectoral requirements, and the way the relationship works in practice. No single clause or label will decide the outcome.

What the distribution agreement should cover

Once the model is clear, the agreement should turn it into a workable mandate. It should spell out the AIFs, territories, investor categories and permitted channels, describe what the distributor may do, and make clear which strategic decisions and approvals remain with the relevant party. It should also be clear that appointment alone does not create a right to market an AIF: marketing can begin only once the relevant passport notification, national private-placement conditions or other local requirements have been met.

The agreement should also leave little room for doubt about regulatory responsibilities. Depending on the model, this may cover offering-document restrictions, marketing communications, investor eligibility, AML/CFT, product governance, conflicts of interest, remuneration, complaints, data protection, record keeping and business continuity. The distributor should be required to keep the necessary authorisations, resources, systems and controls in place and to alert the AIFM promptly to regulatory enquiries, incidents, breaches or other material changes affecting the mandate.

Good information rights are essential. The AIFM needs a reliable view of where, to whom and through which channels each AIF is being marketed. The agreement should therefore be specific about the information to be provided, its format and frequency, and the events that must be escalated. It should also include practical record-retention, access and audit rights. If sub-distributors are used, the conditions for their appointment, the due diligence expected and the flow of information through the chain should be clear. Crucially, the AIFM must be able to act when something goes wrong—for example, by requiring remediation, restricting activities, suspending marketing or onboarding, or ending the arrangement if effective oversight is no longer possible.

The agreement must work in practice

Strong drafting is only part of the answer. Where a distributor acts on behalf of the AIFM and qualifies as its delegate, the AIFMD delegation framework requires the AIFM to conduct appropriate due diligence before appointment and to exercise effective ongoing oversight. These regulatory obligations do not apply on the same basis where an eligible regulated distributor acts in its own name. Even then, proportionate due diligence may make operational sense—for example, to confirm authorisation, resources, systems and controls, and the distributor’s ability to provide the investor, jurisdictional and activity data required under the agreement.

For a delegate, monitoring should be risk-based and may include periodic reporting, marketing records, complaints and incident data, attestations, refreshed due diligence, sample testing and remote or on-site reviews. Missing or unreliable information should trigger documented assessment and proportionate escalation, from enhanced reporting or restrictions to suspension or termination.

Reviewing existing agreements

For existing arrangements, the best place to start is with what happens in practice. Does the agreement accurately describe the distributor’s role? Are the AIFs, jurisdictions, investors and channels clearly identified? Do the parties’ responsibilities still make sense, and are the reporting, access, audit, sub-distribution and intervention rights strong enough? Any changes required by AIFMD II should form part of this wider review, rather than becoming a stand-alone documentation exercise.

Ultimately, the distribution agreement should bridge the commercial model and the AIFM’s regulatory responsibilities. Clear drafting matters, but so do a sound understanding of the relationship, reliable information flows and the ability to step in when needed. Together, these elements allow the AIFM to keep a proper grip on how its AIFs are brought to market.

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