ESMA’s second round of AIFMD passport recommendations

in Industry Insights, 26.07.2016

In continuing its country-by-country approach to determining which non-EU countries should have access to the AIFMD passport, ESMA has published the outcome of its reviews of twelve non-EU countries that are home to Managers or Funds active in the EU market. Canada, Japan, Jersey, Guernsey, and Switzerland got the green light with ESMA seeing no obstacles to giving them the passport.

The USA also got the green light, with ESMA suggesting three possible passporting options for (1) US funds dedicated to professional investors in the EU with no public offering, (2) US non-mutual funds, or (3) US funds dedicated to professional investors as defined in the AIFMD. Australia also got the green light but subject to the Australian Authorities making the necessary changes to give ‘class order relief’ from certain regulatory requirements to all EU Managers. Hong Kong and Singapore also received a green light, but ESMA indicated some reservations due to the fact that market access for UCITS in these countries is only limited to UCITS from certain EU countries only.

Bermuda and the Cayman Islands got a red light and must go back to the drawing board to finalise their own AIFMD-like regimes. These regimes are currently under construction and ESMA considers that it is too early to make any valid assessment. The Isle of Man does not have an AIFMD-like national regime for investor protection and got a red light as a result.

So what does this mean for Managers and Funds in countries that got the green light? To begin with, ESMA’s recommendations do not automatically trigger an AIFMD passport. Instead the recommendations pave the way for the European Parliament, Council, and Commission to make their own country assessments and then formalise the issuance of the much-publicised EU passport to each country. According to the legal texts the Commission should formalise this within a period of three months specifying the date when the EU passport will be extended. It is still unclear whether the EU will want to wait until ESMA has issued a larger number of positive recommendations on non-EU countries before effectively triggering the Passport. At any rate, ESMA is continuing to examine a list of other countries and to work on a Memorandum of Understanding with the authorities in cases where none exist.

Stay tuned!

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