The European Commission ('EC') has responded to the
advice from the European Securities and Markets Authority
('ESMA') on extension of the Alternative Investment Fund
Managers Directive ('AIFMD') passport regime. It has asked
that ESMA complete the third country assessments of the Cayman
Islands ('Cayman') and the United States ('US') by
AIFMD Passports and NPPRs
The AIFMD provides for the authorization, ongoing operation and
transparency of Alternative Investment Funds ('AIF's) and
aims to establish harmonised regulatory standards for AIF Managers
('AIFM's). An AIFM which is authorised and regulated in a
European Union ('EU') Member State ('MS'), may
apply for a 'passport' which will allow it to market AIFs
to institutional investors in all MSs or provide management
services to AIFs domiciled in other MSs. At present, and until at
least 2018, Cayman investment funds can be marketed in the EU under
national private placement regimes ('NPPR's).
Passports for Non-EU countries
The decision on whether the EC would approve the extension of
the passport regime to non-EU countries was due to be taken on 22
October 2015, based on advice from ESMA which was due in July 2015.
ESMA's advice was that it saw 'no obstacles exist to
the extension of the passport...' to countries for which
ESMA has had sufficient evidence to properly assess the relevant
criteria and to satisfy any concerns related to competition and
regulation. By July 2015 ESMA had assessed just six countries, and
only formed an opinion on three. On 13 October 2015 ESMA's
Chair confirmed that ESMA would continue the existing three
incomplete assessments and start assessing a second group of six,
EC Response to ESMA
The EC's reply to ESMA's July advice, signed on 16
December 2015, confirms that the EC will take its decision on
whether to extend the passport regime to third countries 'when
a sufficient number of countries have been appropriately
assessed'. In the meantime it accepts that ESMA's country
by country assessment is correct and that the test set out in the
AIFMD may result in different outcomes depending on the regulatory
and supervisory framework of the countries in which the non-EU
AIFMs and funds are established. The letter says that the EC
understands that there are budget constraints which mean that ESMA
can only deliver its advice on non-EU countries in waves.
ESMA's second opinion
ESMA's advice and opinion suggested that it was not able to
provide a definitive assessment of the extension of the passport
and NPPR regimes by the original July 2015 deadline because there
had been delays in MS's implementing AIFMD. It suggested it
should produce another opinion once the AIFMD had been fully
transposed in all EU countries and ESMA has a chance to see how it
is working in practice. The EC agrees that ESMA provides a second
opinion once it has more information, and that such an updated
opinion will be particularly helpful for the planned review of the
AIFMD due to start in 2017.
Deadline June 2016
The EC has asked ESMA:
to complete its assessment of the
regimes of the USA, Hong Kong, Singapore, Japan, Canada, Isle of
Man, Cayman Islands, Bermuda and Australia by 30 June 2016.
to provide a more detailed assessment
of the capacity of each of the supervisory authorities in the
non-EU jurisdictions it assess and their track record in ensuring
to provide a preliminary assessment
of the expected inflow of funds by type and size into the EU from
relevant non-EU countries.
Cayman investment funds may continue to be marketed in the EU
under national private placement regimes ('NPPR's) until at
least 2018. ESMA will then consider whether the passport regime
should displace NPPRs entirely, but until it takes that decision
the two approaches will continue in parallel. As part of
preparations for the EC's possible extension of the passport to
non-EU countries, in 2015 Cayman introduced two new laws (the
Mutual Funds (Amendment) Law 2015 and the Securities Investment
Business (Amendment) Law 2015) and related regulations have been
developed in conjunction with ESMA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Virtual currency trading value and volume is soaring globally, but regulating virtual currencies and those who provide virtual currency exchange services (Exchangers) is challenging.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).