ESMA published its advice (to the European Parliament, Council of the EU and European Commission) on the application of the AIFMD passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs) and its opinionon the functioning of the passport for EU AIFMs and the national private placement regimes (NPPRs).  

The advice relates to the possible extension of the passport, currently only available to EU entities, to non-EU AIFMs and AIFs which are currently subject to EU NPPRs. As anticipated, ESMA conducted a country-by-country assessment (section 2), so as to take into account the different circumstances of each non-EU jurisdiction as regards the regulatory issues to be considered i.e. investor protection, competition, potential market disruption and the monitoring of systemic risk. ESMA assessed six jurisdictions – Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the USA – who were selected based on a number of factors including the amount of activity already being carried out by entities from these countries under the NPPRs, EU national authorities’ knowledge and experience of dealing with their counterparts and the efforts by stakeholders from these countries to engage with ESMA’s process.  

The Advice concludes that no obstacles exist to the extension of the passport to Guernsey and Jersey, while Switzerland will remove any remaining obstacles with the enactment of pending legislation. No definitive view has been reached on the other three jurisdictions due to concerns related to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria.  

ESMA will continue to work on its assessment of other non-EU countries not covered in this advice with a view to delivering further submissions to the European Parliament, the Council and the Commission. For those non-EU jurisdictions with which there are currently no supervisory cooperation arrangements in place for the purposes of the AIFMD, ESMA will continue its efforts to agree a MoU with the authorities concerned.  

The Advice and Opinion, required under AIFMD, will now be considered by the European Commission, Parliament and Council. In particular, the Commission will decide whether to activate the 3rd country passport or, as suggested by ESMA, to wait until sufficient evidence is available that they can conclude their analysis of a wider list of 3rd countries.