The European Securities and Markets Authority ("ESMA") provided guidance on the application of the Alternative Investment Fund Managers Directive ("AIFMD") passport to alternative investment fund managers ("AIFMS") and alternative investment funds ("AIFs") operating in twelve countries that aren't part of the European Union. The twelve countries are: Australia, Bermuda, Canada, the Cayman Islands, Guernsey, Hong Kong, Japan, Jersey, the Isle of Man, Singapore, Switzerland and the United States.
Currently, Non-EU AIFMs and AIFs must comply with the national private placement regime of each EU country in which the AIFMs' AIFs are marketed or managed, and may not use the passport to market funds across the European Union. ESMA's guidance concerns the potential extension of the passport, which is available exclusively to EU entities, and to certain non-EU AIFMs and AIFs in order to allow them to market and manage funds throughout the European Union. In its guidance, ESMA assessed whether each country faced significant obstacles regarding (i) investor protection, (ii) competition, (iii) market disruption, and (iv) the monitoring of systemic risk, and whether these obstacles would impede the application of the AIFMD passport.
ESMA made the following assessments:
- No significant obstacles impede the application of the AIFMD passport to Canada, Guernsey, Japan, Jersey and Switzerland.
- As to AIFs only, no significant obstacles impede the application of the AIFMD passport in Hong Kong and Singapore.
- No significant market disruptions or obstacles to competition impede the application of the AIFMD passport to Australia, as long as the Australian Securities and Investment Committee extends the "class order relief" from some requirements of the Australian regulatory framework to all EU Member States. Currently, the relief is available only to some EU Member States.
- No significant obstacles concerning investor protection and the monitoring of systemic risk impede the application of the AIFMD passport to the United States.
- The extension of the passport for U.S. funds may be subject to conditions that may include (a) granting the passport only to those U.S. funds that are dedicated to professional investors, are marketed in the European Union by managers, and do not involve any public offering; (b) granting the passport only to those U.S. funds that are not mutual funds; and (c) granting the passport only to those U.S. funds that are available to professional investors alone.
ESMA emphasized that it cannot offer definitive advice concerning Bermuda and the Cayman Islands' criteria for investor protection, or the effectiveness of the countries' enforcement of those protections, since both countries are in the process of implementing new regulatory regimes and any assessment will need to take the final rules into account. Additionally, ESMA stated that the absence of an AIFMD-like regime in the Isle of Man makes it difficult to assess whether the investor protection criterion is met in that country.
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