Following a week delay, the European Securities and Markets Authority (ESMA) issued an opinion recommending that Guernsey and Jersey be awarded pan-EU marketing passports provided to managers authorized under the Alternative Investment Fund Managers Directive (AIFMD). The regulator also recommended that Switzerland be awarded the same status should it pass proposed legislative changes that will bring it into line with the directive.
ESMA reviewed the regulatory regimes of six countries (Guernsey, Jersey, Singapore, Hong Kong, Switzerland and the US) to determine what non-EU managers should be extended the passport.
While Switzerland and the Channel Islands – who have built regulatory regimes and fund vehicles modelled after the directive – where given the blessing by ESMA, the US, Singapore and Hong Kong, three major private fund domiciles, still await ESMA’s opinion. The EU regulator aims to finalize these reviews “as soon as practicable” and will continue reviewing regulatory regimes on a country by country basis.
GPs outside of the Channel Islands will need to continue using individual sovereigns’ private placement regimes until EU policymakers make a decision – which the directive requires by 2018.
The opinion, published Thursday, includes advice on how the passport can work in practice; but suggests the EU Commission, Parliament and Council, which must reject or accept ESMA’s opinion in the next three months, hold off on extending the passport to non-EU countries until enough jurisdictions have been reviewed.
In relation to its assessment of the US, ESMA made a significant statement about how granting the passport to US managers would cement an uneven playing field for EU managers seeking to market their vehicles in the US. Lawyers have suggested onerous requirements that come with registration with the US Securities and Exchange Commission – which US managers were only subjected to in 2012 – factored into the decision.
That divides the applicants for AIFMD passports into two tiers, lawyers warn. Jurisdictions like the Cayman Islands already moving to implement their own AIFMD-like regimes in order to qualify for the passport, could be on a fast-track to approval, while larger hubs such as the US will fall behind as the regulators wrangle over equality of access.
In terms of how the passport will work, ESMA said the delay of AIFMD meant it was still too early for a full assessment but noted that it has already identified several issues including different interpretation of the marketing rules among European member states. The body recommended greater convergence in the definition of terms.
Nicholas Donato contributed to this report.