European Commission responds to ESMA’s opinion on the AIFMD passport

The European Commission (EC) has written to the European Securities and Markets Authority (ESMA) in response to its opinion and advice on the application of the Alternative Investment Fund Managers Directive (AIFMD). The letter can be read here (eu_commission_letter_aifmd_passport).

To recap, on July 30, 2015, ESMA published its advice to the EC on which non-EU jurisdictions it felt should benefit from the pan-EU fund marketing and distribution passport under the AIFMD. At present the passport is only available to EU managers of EU funds. INDOS Financial’s article on the opinion can be found here.

In its advice, ESMA confirmed it would not issue a blanket recommendation on all third countries but would rather make qualitative assessments (considering investor protection, market disruption, competition and monitoring of systemic risk) on a case-by-case basis as to which jurisdictions it felt ought to gain access to the passport. The EC has now confirmed it agrees with this country-by-country approach.

In its opinion,  ESMA said it could see no reason as to why the passport should not be extended to Switzerland, Jersey and Guernsey although it added it needed to carry out further assessments on the regulatory regimes in the US, Hong Kong and Singapore. The EC has now confirmed it will defer a decision on whether to extend the passport to Switzerland, Jersey and Guernsey until a sufficient number of countries have been appropriately assessed by ESMA.

Furthermore, the EC has asked ESMA to complete its assessment of the following countries by 30 June 2016:

USA, Hong Kong, and Singapore; plus the assessment of six countries selected by ESMA for its “second wave”, namely Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia.

In addition, the EC has invited ESMA to:

  • Provide a more detailed assessment of the capacity of non-EU supervisory authorities and their track records in ensuring effective enforcement, including the countries in ESMA’s original recommendation.
  • Provide an assessment of the expected inflow of funds into the EU from relevant third countries (in order to enable the EC to better assess any potential market disruption and competition effects).
  • Produce another opinion on the functioning of the EU passport and National Private Placement Regimes (NPPRs) once there is more experience of the passport. The EC notes it would be helpful for the planned review of AIFMD that should start in 2017.