EUROPEAN UNION: ESMA issue advice on extension of AIFMD passport to non-EU AIFMs and AIFs

Thursday September 22 2016

The European Securities and Markets Authority (ESMA) has issued its advice to the European Parliament, Council and Commission on the application of the AIFMD passport to certain non-EU countries.

The main ESMA findings for each country are as follows:

USA

No significant obstacles regarding the monitoring of systemic risk impeding the application of the AIFMD passport to the U.S. With respect to investor protection, there are differences between the U.S regulatory framework and the AIFMD. However, these differences are not seen as a significant obstacle impeding the application of the AIFMD passport to the U.S.

The market access conditions which would apply to U.S funds dedicated to professional investors in the EU in the event that the AIFMD passport is extended to the U.S would be different from the market access conditions applicable to EU funds dedicated to professional investors in the U.S.

If the AIFMD passport were to be granted to the U.S, ESMA advises that the EU legislators may wish to consider possible options including:

• granting the AIFMD passport only to those U.S funds dedicated to professional investors to be marketed in the EU by managers not involving any public offering;
• granting the AIFMD passport only to those U.S funds which are not mutual funds (under the 1940 Investment Company Act);
• granting the AIFMD passport only to those U.S funds which restrict investment to professional investors as defined in AIFMD.

Guernsey, Jersey, Hong Kong, Singapore

No significant obstacles regarding investor protection, competition, market disruption and the monitoring of systemic risk impeding the application of the AIFMD passport to these countries.

Australia

No significant obstacles regarding competition, market disruption and the monitoring of systemic risk impeding the application of the AIFMD passport to Australia.

With respect to investor protection, there are differences between the Australian regulatory framework and the AIFMD. However, these differences are not seen as a significant obstacle impeding the application of the AIFMD passport to Australia.

Bermuda

No significant obstacles regarding competition, market disruption and the monitoring of systemic risk impeding the application of the AIFMD passport to Bermuda.

With respect to investor protection, no definitive advice can be provided until the final version of the AIFMD-like regime is available.

With respect to the assessment of the effectiveness of enforcement, no definitive advice can be provided until a pending review of its investment funds regulatory framework is adopted.

Canada

No significant obstacles regarding competition, market disruption and the monitoring of systemic risk impeding the application of the AIFMD passport to Canada.

With respect to investor protection, there are differences between the Canadian regulatory framework and the AIFMD. However, given the general requirements applicable to all non-EU AIFMs wishing to make use of the AIFMD passport, these differences are not seen as a significant obstacle impeding the application of the AIFMD passport to Canada.

Cayman Islands

No significant obstacles regarding competition and market disruption impeding the application of the AIFMD passport to the Cayman Islands. With respect to investor protection, no definitive advice can be provided until the final version of its AIFMD-like regime is available. With respect to the assessment of the effectiveness of enforcement and monitoring of systemic risk no definitive advice can be provided until an ongoing legislative amendment is adopted.

Isle of Man

No significant obstacles regarding competition, market disruption and the monitoring of systemic risk impeding the application of the AIFMD passport to the Isle of Man.

With respect to investor protection, the absence of either a regulatory project of putting in place an AIFMD-like regime or an IMF FSAP makes it difficult to assess, with the same level of certainty, the investor protection criterion mentioned in the article 67(4) of the AIFMD in a way that would be consistent with the assessments of the other non-EU countries.

Japan

No significant obstacles regarding market disruption, obstacles to competition, and the monitoring of systemic risk impeding the application of the AIFMD passport to Japan. With respect to investor protection, there are differences between the Japanese regulatory framework and the AIFMD. However, these differences are not seen as a significant obstacle impeding the application of the AIFMD passport to Japan.

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