On 19 January 2016, the European Securities and Markets Authority (“ESMA”) published a letter it received from the European Commission on 17 December 2015 regarding the availability of the management and marketing passport for non-EU managers under the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”). The Commission’s letter will be of interest to non-EU managers, in particular with regards to timing.
Those following regulatory developments in this space will recall that in July 2015, ESMA published its long-awaited advice to the Commission (and others) on whether the AIFMD passport should be extended to non-EU managers. ESMA’s advice was welcomed by managers in Guernsey, Jersey and Switzerland, where ESMA foresaw no significant obstacles to extending the passport (in Switzerland minor legislative amendments were first required). However, other non-EU managers were left disappointed. With respect to the USA, Hong Kong and Singapore (the only other jurisdictions assessed during this “first wave”), ESMA’s advice was not definitive, and recommended that ESMA be granted more time to prepare further advice, following continued country-by-country assessments.
Against this backdrop, a few interesting points arise:
- The Commission has endorsed ESMA’s country-by-country approach - when ESMA’s advice was published last year, this approach attracted criticism in some quarters, and so it is interesting to see that it has been “ratified” by the Commission.
- Since the publication of ESMA’s advice, the timescale for developments in this area has been unclear, and frustratingly, non-EU managers have simply been left to wait and watch. ESMA has now been invited to finalise its assessment of the USA, Hong Kong and Singapore by 30 June 2016.
- ESMA has also been invited to complete its assessment of the “second wave” of countries by this date. The second wave comprises Japan, Canada, the Isle of Man, the Cayman Islands, Bermuda and Australia. On completion, this will cover most significant non-EU funds jurisdictions, although there will undoubtedly be some non-EU managers disappointed not to see their country listed as part of the second wave, in particular those managers investing in Africa and India through Mauritius.
ESMA’s advice previously recommended that the Commission wait until ESMA had delivered positive advice on a “sufficient number of non-EU countries” before activating the non-EU passport, in order to avoid any adverse market impact, though neither ESMA nor the Commission have made public their views on what the “sufficient number” might be.
The good news for non-EU managers to take away from the Commission’s letter is that ESMA has now been put back on the clock. However, given ESMA’s resource constraints and its country-by-country approach, the timing is challenging, and it will be interesting to see what ESMA delivers by 30 June 2016 (assuming it delivers anything at all). Managers would, for the time being, be advised not to build their future fundraising plans around this timetable, since even if ESMA produces advice in June 2016 that is positive with respect to their jurisdictions, there is still no indication of when the passport will go live.