On July 19, 2016, ESMA published its advice to the European Parliament, Council and Commission on the extension of the AIFMD passport to non-EU Alternative Investment Fund Managers and AIFs in twelve non-EU countries: Australia, Bermuda, Canada, Cayman Islands, Guernsey, Hong Kong, Japan, Jersey, Isle of Man, Singapore, Switzerland, and the United States. ESMA has reviewed whether there are significant obstacles with regard to investor protection, competition, market disruption and the monitoring of systemic risk.

For Canada, Guernsey, Japan, Jersey and Switzerland, ESMA concluded that there are no significant obstacles impeding the application of the passport regime. For Hong Kong and Singapore, there are no significant obstacles impeding the application, but ESMA noted that both Hong Kong and Singapore have regimes which facilitate the access of UCITS from only certain EU Member States to retail investors in their territories. With regard to Australia, there are no significant obstacles impeding the application of the AIFMD passport, provided that the Australia Securities and Investments Committee extends to all EU Member States the “class order relief,” an exemption from certain requirements of the Australian regulatory framework, which is currently only available for UK and German fund managers.

For the United States, there were no significant obstacles regarding investor protection and the monitoring of systemic risk which would impede the application of the AIFMD passport to the United States. However, ESMA raised concerns around the competition and market disruption criteria of its assessment, in that extension of the AIFMD passport could result in an unlevel playing field between EU and non-EU AIFMs for funds marketed by managers to professional investors which involve a public offering. For Bermuda and the Cayman Islands, ESMA stated that it could not give definitive advice with regard to the criteria on investor protection and effectiveness of enforcement as both countries are currently implementing new regulatory regimes for alternative funds. Finally, in relation to the Isle of Man, ESMA found it difficult to assess whether the criteria of investor protection was met as there was no AIFMD-like regime. The advice will now be considered by the European Parliament, Council and Commission.

ESMA’s advice is available at: https://www.esma.europa.eu/sites/default/files/library/2016-1140_aifmd_passport_1.pdf