The European Securities and Markets Authority (ESMA) has published its advice in relation to the application of the Alternative Investment Fund Managers Directive (AIFMD) passport to non-EU alternative investment fund managers (AIFMs) and alternative investment funds (AIFs) and its opinion on the functioning of the passport for EU AIFMs and the national private placement regimes (NPPRs).
In its advice ESMA:
- conducted a country-by-country assessment for six jurisdictions – Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the United States;
- concluded positively that no obstacles exist to the extension of the passport to Guernsey and Jersey, with Switzerland removing any remaining obstacles with the enactment of pending legislation; and
- offered no definitive decision on Singapore, Hong Kong or the United States due to concerns related to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria.
In its opinion ESMA concluded that there is insufficient evidence to indicate that the AIFMD’s EU passport and NPPRs have raised major issues in terms of the functioning and implementation of the AIFMD framework. However, ESMA added that after a further period of implementation in all Member States it could see merit in preparing another opinion on the functioning of the passport and NPPRs. ESMA also flagged several issues in relation to the use of the EU passport, including:
- divergent approaches with respect to marketing rules, including heterogeneity of fees charged by national competent authorities where the AIFs are marketed and the definition of what constitutes a “professional investor”; and
- varying interpretations of what activities constitute “marketing” and “material changes” under the AIFMD passport in the different Member States. Therefore, ESMA sees merit in greater convergence in the definition of these terms.
The report and the opinion have been sent to the European Commission, the European Parliament and the Council of the EU (the institutions) so that a decision can be made as to whether the relevant provision in the AIFMD can be activated extending the passport through a Delegated Act.
In the upcoming months ESMA aims to finalise its assessments of Singapore, Hong Kong and the United States as soon as practicable and to assess further groups of non-EU countries until it has provided advice on all the non-EU countries that it considers should be included in the extension of the passport.
ESMA also notes that “the institutions may wish to consider waiting until ESMA has delivered positive advice on a sufficient number of non-EU countries, before introducing the passport in order to avoid any adverse market impact that a decision to extend the passport to only a few non-EU countries might have.”
View ESMA advises on extension of AIFMD passport to non-EU jurisdictions, 30 July 2015