Time to speak up: ESMA’s call for evidence

ESMA’s call for evidence | KPMG | Global|

Over the next month, both EU and non-EU fund managers have a unique opportunity to tell the European regulators about their experiences with the AIFMD passporting and private placement regimes. What they hear could help shape the competitive landscape significantly.

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If you are a fund manager with activities – current or planned – in the EU market, now is the time to voice your opinion on the existing AIFMD passporting and private placement regimes.

The recent call for evidence by ESMA (the European Securities and Markets Authority) on the practical use of the regimes provides asset managers around the world with a valuable and unique opportunity to help the European regulator shape the future of the EU marketplace. It is an opportunity not to be missed. 

Forming an opinion

Broadly speaking, ESMA’s recent ‘Call for evidence’ attempts to assess the industry’s experience and perspectives in four main areas:

  • The use of the passport, including problems on the functioning of the passport and any issues of investor protection that may have occurred
  • The use of private placement regimes, including perspectives on any issues of compliance with applicable AIFMD requirements
  • The potential impact that any extension of the passport to non-EU AIFMs may produce, and
  • Perceived differences in approach and frameworks between the EU and ‘home country’ regimes.

Any evidence or perspectives provided to ESMA are intended to help the regulator shape its opinion to the European Commission which, in turn, will help the Commission develop a delegated act that would essentially extend the passport regime to non-EU funds and managers. 

Answering the call

Fund managers both inside and outside of the EU should be keen to answer ESMA’s call. Indeed, given recent reports that show significant differences between the fees and compliance requirements set by the various EU national competent authorities1 with regards to passporting within the EU, it is clear that some effort progress could be made to reduce the complexity of the existing system.

Those operating outside of the EU should also note that their feedback will help ESMA decide – on a country-by-country basis – whether the passport will be extended to individual non-EU countries. As the report notes, “ESMA’s advice will not treat all non-EU countries as a single block… only those that satisfy the criteria set out in Article 67(4) of the AIFMD would benefit from the extension of the passport.”

Making your voice heard

Clearly, fund managers have a vested interest in helping shape the future of the EU’s passporting and private placement regimes. However, time is of the essence: ESMA released their call for evidence in early November and has set a deadline for submissions of 8 January 2015.

A number of asset managers – particularly larger managers with multi-jurisdictional experience – will want to submit their evidence and opinions to ESMA directly. Those with significant relationships with ESMA – and non-EU national competent authorities (who have also been invited to participate in the call for evidence) – will want to ensure that their voices are heard by the regulator directly.

Many others, however, will likely decide to instead participate in the call for evidence through an independent and recognized third party that can aggregate the evidence and synthesize the findings to provide ESMA with more practical insight into the actual challenges, concerns and issues faced by the sector. For smaller asset managers, this may be a savvy approach to making sure that your opinions are heard. 

At KPMG, we’ve been working closely with our clients both inside and outside of the EU to help them develop, assess and aggregate their feedback and evidence for ESMA. And our experience suggests that – while some of the questions may seem straight-forward at the outset – fund managers will want to carefully consider how they respond to the regulator.

ESMA’s call for evidence may not be a mandatory regulatory requirement, but we believe that managers should – indeed, must – take this golden opportunity to help shape the future of the industry within the EU. Your future growth may depend on it.

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