In July 2015, ESMA provided advice to the European Commission on the functioning of the Alternative Investment Fund Managers Directive (AIFMD) passport and the extension of the passport for non-EU AIFMs and non-EU AIFs. ESMA noted that due to the delay in implementation of the AIFMD and of its transposition in some Member States, it was too early to provide a definitive opinion on advice the functioning of the passport. ESMA suggested a further opinion be prepared in future.
As regards the extension of the passport to non-EU AIFMs and non-EU AIFs, ESMA’s advice of 19 July 2016 was:
- No significant obstacles impeding the application of the AIFMD passport (for managers or funds) to Canada, Guernsey, Japan, Jersey and Switzerland;
- No significant obstacles impeding the application of the AIFMD passport to AIFs in Hong Kong and Singapore. However, both jurisdictions operate regimes that facilitate the access of UCITS from only certain EU Member States to retail investors in their territories;
- No significant obstacles regarding market disruption and obstacles to competition impeding the application of the AIFMD passport to Australia, provided the Australian Securities and Investment Committee (ASIC) extends to all EU Member States the ‘class order relief’, currently available only to some EU Member States, from some requirements of the Australian regulatory framework;
- No significant obstacles regarding investor protection and the monitoring of systemic risk which would impede the application of the AIFMD passport to the US. With respect to the competition and market disruption criteria, no significant obstacle for funds marketed by managers to professional investors that do not involve any public offering. However, for funds marketed by managers to professional investors that do involve a public offering, a potential extension of the AIFMD passport to the US risks an un-level playing field between EU and non-EU AIFMs. The market access conditions that would apply to these US funds in the EU under an AIFMD passport would be different from, and potentially less onerous than, the market access conditions applicable to EU funds in the US and marketed by managers involving a public offering. ESMA suggests, therefore, that the EU institutions consider options to mitigate this risk;
- For Bermuda and the Cayman Islands, ESMA could not give definitive advice with respect to the criteria on investor protection and effectiveness of enforcement since both countries are in the process of implementing new regulatory regimes and the assessment will need to take into account the final rules in place.
- For the Isle of Man, ESMA finds that the absence of an AIFMD-like regime makes it difficult to assess whether the investor protection criterion is met.
The European Commission is still considering this advice and decide whether to propose to Parliament and Council the introduction of the non-EU passport and, if so, to which jurisdictions. It had been expected that the Commission would finalize its decision within three months of receiving the advice from ESMA. However, it has indicated that there is a number of issues to analyze, including taxation and anti-money laundering aspects. The timetable for activation of the passports remains unclear.