After much anticipation, the European Securities and Markets Authority (ESMA) has published further advice in relation to the application of the Alternative Investment Fund Managers Directive (AIFMD) passport to non-EU Alternative Investment Managers (AIFMs) and Alternative Investment Funds (AIFs) in twelve countries.
ESMA concluded that there are no significant obstacles impeding the application of the AIFMD passport to Guernsey and Jersey, being two of only five jurisdictions to achieve an unqualified assessment.
Currently, non-EU AIFMs and AIFs must comply with each EU country's national regime when they market funds in that country. The extension of the AIFMD passport regime, which is currently only available to EU entities, would allow Channel Islands managers and managers of Channel Islands funds to seek a passport under AIFMD, so that they could market and manage throughout the EU.
This advice follows ESMA's initial recommendation in July 2015 that Guernsey and Jersey should be granted an AIFMD passport and will now be considered by the European Commission, Parliament and Council (the EU Institutions). In principle, the Commission should, within three months of the publication of positive advice from ESMA, adopt a delegated act specifying the date when the AIFMD passport will be extended to non-EU AIFMs and AIFs. The advice notes, however, that the EU Institutions may wish to consider waiting until ESMA has delivered positive advice on a sufficient number of non-EU countries before adopting such delegated act, taking into account the potential impact on the market that a decision to extend the passport might have amongst other factors.
The immediate advantage of the AIFMD passport will be the ability of Guernsey and Jersey funds (and funds managed by Guernsey and Jersey managers), once a passport has been received, to be marketed to professional investors throughout the EU on the basis of a regulator to regulator notification system, subject to full compliance with the AIFMD. However, Channel Islands funds managed in the Channel Islands or otherwise outside of the EU (and non-EU funds managed by Channel Islands managers) will still be able to market into the EU via national private placement regimes (subject to domestic legislation of the Member States) until at least 2018, meaning that they need only comply with AIFMD reporting and disclosure requirements until such time as AIFMD passports become mandatory.
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