On January 19, ESMA published a letter it has received from the European Commission relating to the application of the EU passport under the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”) to non-EU alternative investment fund managers (“AIFMs”) and alternative investment funds (“AIFs”).

The Commission stated that with regard to the advice on granting the AIFMD passport to managers and funds established in third countries, it agrees that the country-by-country approach adopted by ESMA is correct. It noted that the nature of the test set out in Article 67 of the AIFMD may result in different outcomes depending on the regulatory and supervisory framework of the third countries in which non-EU AIFMs and funds are established.

The Commission stated that it will take a decision [as to whether the AIFM Directive passporting regime should be extended to the management and marketing of AIFs by non-EU AIFMs, and to the marketing of non-EU AIFs by EU AIFMs] when a sufficient number of countries have been appropriately assessed.

The Commission invites ESMA to:

  • Complete, by June 30, 2016, the assessment of the USA, Hong Kong, Singapore, Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia.
  • Provide a more detailed assessment of the capacity of supervisory authorities and their track record in ensuring effective enforcements, including in those countries looked at in the first wave of countries.
  • Provide a preliminary assessment of the expected inflow of funds by type and size into the EU from relevant third countries.

The letter concludes with the Commission agreeing with ESMA’s suggestion that it produces another opinion on the functioning of the passport and national private placement regimes once the AIFMD is fully transposed in all member states and there is more experience on the functioning of the framework. (An accompanying press release explains that ESMA suggested it produce another opinion because the delay in implementing the AIFMD, together with the delay in its transposition in some member states, made it difficult for ESMA to provide a definitive assessment by July 2015, the initial legislative deadline).