The European Securities and Markets Authority (ESMA) today issued its initial set of recommended countries for the EU's Alternative Investment Fund Managers Directive (AIFMD) passport.

Of the more than 40 jurisdictions that ESMA is expected to assess in relation to the passport extension, to date it has assessed six.

'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's announcement reads.

Prior to activating the relevant provision in the AIFMD extending the passport to these jurisdictions, ESMA noted that the European Commission, Parliament and Council 'may wish to consider waiting until ESMA has delivered positive advice on a sufficient number of non-EU countries, before introducing the passport in order to avoid any adverse market impact that a decision to extend the passport to only a few non-EU countries might have'.

ESMA also 'aims to finalise the assessments of Hong Kong, Singapore and the USA as soon as practicable and to assess further groups of non-EU countries until it has provided advice on all the non-EU countries that it considers should be included in the extension of the passport'.

In Cayman, Minister of Financial Services Wayne Panton noted that Cayman's Legislative Assembly will consider amendments in August that will facilitate the extension of the AIFMD passport.

'In our 10 July advisory to the financial services industry, the Ministry outlined two amendment bills that will establish an opt-in regime for regulating Cayman-domiciled investment funds and managers connected to the European Union (EU)', he said. 'We expect this will satisfy ESMA requirements and strongly position us for a positive assessment'.

He also noted that ESMA's advice that the European Commission, Parliament and Council wait for a sufficient number of recommendations before introducing the passport is 'eminently fair and appropriate'.

Cayman's investment funds currently are marketed in the EU under national private placement regimes (NPPRs). The NPPR and passport regimes will coexist until at least 2018, by which time ESMA will have decided, and acted upon, whether or not the passport regime should entirely displace NPPRs.

Minister Panton acknowledged that through AIFMD, Cayman intends to strengthen and expand its EU presence. 'We are a global leader in investment funds, and we intend to build on our market dominance with our new AIFMD regime as the platform upon which Cayman will pursue further growth in our share of the EU's investment funds sector'.

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