The Directive on Alternative Investment Fund Managers (Directive 2011/ 61/EU or "AIFMD"), regulates the management and marketing of Alternative Investment Funds ("AIFs") and aims to provide for and harmonise an internal market for Alternative Investment Fund Managers ("AIFMs") within the EU. AIFMD currently offers a marketing passport ("Passport") to compliant EU AIFMs of EU AIFs. The AIFMD contemplates that this Passport can be extended to non- EU AIFs, and to non-EU AIFMs from 2015. The extension of the Passport is subject to the acceptance by European Parliament, Council and Commission of positive advices from the European Securities and Markets Authority ("ESMA").
ESMA has today published its advice in relation to the application of the Passport to non-EU AIFMs and AIFs ("Advice") together with its opinion on the functioning of the passport for EU AIFMs and the national private placement regimes ("NPPRs") ("Opinion"). The Advice and Opinion, required under AIFMD, will now be considered by the European Commission, Parliament and Council.
As Expected, Cayman Excluded from Initial Assessment
Regarding the advice on the potential extension of the passport, ESMA opted for a country-by-country assessment to allow for a distinction to be made between the different situations of non-EU countries with respect to the aspects that ESMA has to consider it is assessment. In the advices issued today, ESMA assessed six jurisdictions (Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the United States of America), excluding the Cayman Islands from its assessment as had been widely expected. However, in a positive note for those jurisdictions not considered in the initial advices, ESMA has stated that it intends to continue its assessments until it has provided advice on all the non-EU countries that it considers relevant for the purposes of the extension of the Passport under Article 67 of AIFMD.
Advice and Opinion
The Advice and Opinion have been sent to the European Commission, Parliament and Council for their consideration on whether to activate the relevant provision of the AIFMD in respect of extending the Passport.
In issuing its Advice, ESMA has indicated that those institutions may wish to consider delaying any activation of the Passport until a sufficient number of non-EU countries have been assessed positively by ESMA, taking into account such factors as the potential impact on the market that a decision to extend the passport might have.
In issuing its Opinion on the functioning of the Passport and NPPRs, ESMA has stated that its preliminary view is that in light of the short timeframe between implementation of AIFMD in the EU, and the date of the issue of the Opinion, a definitive assessment on the functioning of the Passport and NPPRs is difficult. ESMA has therefore recommended that a further opinion be issued by it after a longer period.
Impact for Cayman Funds
The status quo for Cayman Funds will remain until such time as ESMA updates its Advice and Opinion to specifically deal with Cayman. That is, (and excluding any sale by reverse solicitation), where a Cayman Fund is being sold in the EU it will be done by way of private placement and in particular the relevant NPPRs of the member state in which the target investor is based.
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