On 7 November 2014, the European Securities and Markets Authority (ESMA) issued a consultation paper, Call for Evidence: AIFMD passport and third country AIFMs, requesting information to help shape ESMA’s stance on the current status and prospective developments of the Alternative Investment Fund Managers Directive (AIFMD).

This consultation is particularly important for non-EU managers who are treated as Alternative Investment Fund Managers (AIFMs) under the AIFMD as it addresses the powers of Member State regulators to authorise a non-EU AIFM under the AIFMD. These powers, set out in Article 37 of the AIFMD, are yet to come into force. A benefit of authorisation under a Member State’s rules implementing Article 37 is that a non-EU manager will enjoy the benefit of the passport without having to establish a branch or subsidiary in its 'Member State of Reference'. The passport will also extend both to the marketing of any EU Alternative Investment Funds (AIFs) and non-EU AIFs which it manages.

Under the AIFMD, ESMA must present its opinion on the functioning of the passport for EU AIFMs and the national private placement regimes by 22 July 2015. In addition to this, it must give advice on the extension of the EU passport to non-EU AIFs and non-EU AIFMs.

The criteria on which ESMA’s evaluation will be based are laid out in Article 67(4) of the AIFMD. To ensure that its advice reflects current market opinion, ESMA’s consultation addresses 29 questions to EU and non-EU asset management industry and to investors on:

  • the nature of their experience in the functioning of the passports for EU AIFMs and the national private placement regimes
  • the level of satisfaction
  • points of issue and
  • speculation on the impacts of extending the passport to non-EU AIFMs.

Assuming that ESMA makes a positive recommendation, the Commission will specify the date when the rules set out in Article 35 and Articles 37-41 of the AIFMD become applicable in all Member States, thereby extending the EU passport to non-EU AIFs and non-EU AIFMs. This is expected to be in late 2015 or early 2016.

Next Steps

Responses to the consultation can be made via the ESMA website until 8 January 2015 for consideration.

AIFMD Q&A: clarification on reporting for non-EU AIFMs and delegation

ESMA has also updated its Q&A on the application of the AIFMD, regarding particular questions about reporting to national competent authorities under Articles 3, 24, and 42. It also includes a new section on the calculation of the total value of assets under management.

Article 24 reporting

Of particular interest is the question on whether a non-EU AIFM that markets its AIFs in the EU under Article 42 of the AIFMD should continue to report to the national competent authorities of the Member States in which it markets its AIFs after the marketing period of the AIF has ended. ESMA has clarified that the reporting obligations to national competent authorities do not depend on the actual marketing period of the AIF but rather on the existence of investors in the AIF in the jurisdiction of the authority concerned. Therefore, non-EU AIFMs should continue to report to national competent authorities after the marketing period has ended unless they confirm that there are no investors in the jurisdiction of the authority concerned who are invested in the AIFs.

There are also new questions and answers on the content of Article 24 reporting.

Delegation by AIFMs of portfolio management and/or risk management

A new section on delegation has been added. This addresses the question of how delegation arrangements are to be assessed where a multi AIF AIFM delegates management. ESMA has clarified that the provisions on letter-box entities in Article 82 of the implementing Regulation apply in relation to the management of a particular AIF and not in relation to a group of AIFs. The assessment should therefore be carried out at the level of each individual AIF.