The European Securities and Markets Authority (ESMA) reported earlier this week, in its chair Steven Maijoor’s statement to a committee of the European Parliament, on its ongoing work on the extension of the AIFMD passport to non-EU AIFMs and AIFs. This follows ESMA’s 30 July 2015 advice and opinion, which examined six non-EU countries and concluded that no obstacles exist to the extension of the AIFMD passport to Jersey and Guernsey (and Switzerland on the basis it will remove any remaining obstacles with the enactment of pending legislation) and that it could not reach a definitive view on the other three jurisdictions, due to concerns relating to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria.
Key points of interest from ESMA’s 13 October statement:
- ESMA will continue its assessment of Hong Kong, Singapore and the US (on which it was not definitive in its July advice) with a view to reaching a definitive conclusion on whether to extend the passport to those countries.
- It will start to assess a second group of non-EU countries – Australia, Canada, Japan, the Cayman Islands, the Isle of Man and Bermuda. ESMA has selected these on the same basis as the countries selected in the first wave (considering factors including the amount of activity already being carried out by entities from these countries under the national private placement rules, the existing knowledge and experience of EU regulators with respect to their counterparts in these jurisdictions, and efforts made by stakeholders from these countries to engage with the process).
- ESMA will focus on putting in place a framework in case the passport is extended to one or more non-EU countries, including preparing for the necessary strengthened supervisory co-operation.
- In the coming months ESMA will look at how to promote a common approach on various divergent issues it identified in its July opinion. These include interpretation of AIFMD marketing rules in the different member states, including over fees charged by regulators, and interpretations of what activities constitute “marketing” and “material changes” under the AIFMD passport.
Although ESMA does not set out a timeframe for implementing these next steps, one of the objectives in its recently-published 2016 Work Programme is its operational role in the functioning of a non-EU passport.
In the meantime, we are expecting the European Commission to determine (in accordance with AIFMD, by the end of this month) the date when the AIFMD rules on passport extension will apply in respect of Jersey, Guernsey and Switzerland. However, ESMA reiterated in its statement a proviso in its July advice, that the EU institutions may prefer to wait until ESMA has delivered positive advice on a larger number of non-EU countries before triggering the relevant legislative procedures, taking into account potential market impact on any passport extension. ESMA also reiterated that there would be merit in it preparing another opinion, having had more time to assess the market. The upshot may be therefore that we have to wait.
The status quo remains that marketing in Europe by non-EU AIFMs and by EU AIFMs marketing non-EU AIFs has to be carried out using the private placement regimes – where there are a wide range of different, complex, and in some cases, still evolving requirements that may apply.