European Union: European Securities And Markets Authority Opines On Functioning Of EU Passport And National Private Placement Regime And Advises On Extension Of Passport To Non-EU Jurisdictions

On July 30, 2015, ESMA published its Advice to the European Commission, Parliament and Council on the potential extension of the EU passport to non-EU countries under the Alternative Investment Fund Managers Directive. It also published its Opinion on the functioning of the EU passport under the AIFMD and on the operation of the National Private Placement Regime. Under current rules, non-EU Alternative Investment Fund Managers and EU AIFMs of non-EU Alternative Investment Funds are only able to market their funds into member states when permitted by the relevant NPPR. ESMA has now assessed six non-EU jurisdictions: Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the US. ESMA's Advice states that there are no obstacles for extending the passport to Guernsey and Jersey AIFs and AIFMs. The same applies to Switzerland, pending certain amendments to the Swiss Federal Act on Stock Exchanges and Securities Trading. ESMA states that there is currently a lack of evidence for an appropriate assessment to be made in respect of Hong Kong, Singapore and the US, though it will complete its assessment of these jurisdictions as soon as possible. An assessment of other jurisdictions will also be undertaken. ESMA's Opinion states that some issues have been identified related to the use of the EU passport, including divergent approaches to marketing rules as well as varying interpretations of activities that may constitute "marketing" and "material changes". The Opinion concludes that there is insufficient evidence to show that either the passport or NPPR have raised any major issues in the functioning and implementation of the AIFMD framework. ESMA recommends that a further Opinion on the functioning of the passport and the NPPR is prepared after a longer period of implementation has elapsed in all Member States. The Advice and Opinion will now be considered by the European Commission, Parliament and Council.

The ESMA press release, Opinion and Advice are available at: http://www.esma.europa.eu/news/ESMA-advises-extension- AIFMD-passport-non-EU-jurisdictions?t=326&o=home.

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