The European Securities and Markets Authority (ESMA) has issued advice to the EU on which non-EU countries should be afforded a pan-EU marketing passport provided by the Alternative Investment Fund Managers Directive (AIFMD).
The European regulator gave its guidance on Monday on 12 non-EU countries, including the US, Japan and Australia. Private fund managers outside of the AIFMD's scope are only currently able to solicit capital from European institutional investors using each country's individual fund marketing rules, known as National Private Placement Regimes (NPPR).
ESMA as originally mandated to provide this guidance in July last year but delayed the decision citing a “lack of sufficient evidence to properly assess” the countries. This let down both US and Asian fund managers that said they wanted a more streamlined approach to garnering capital in 'Fortress Europe.'
Also lamenting the decision were European institutional investors who had been left disappointed that access to some of the best US and Asian real estate fund managers had been effectively closed, as not all fund managers located outside of the EU have felt the need to go through the rigmarole of marketing in Europe using NPPRs.
However, the regulator has now given its blessing to managers based in Canada, Guernsey, Japan, Jersey and Switzerland to obtain the passport citing “no significant obstacles” regarding investor protection, competition, and market disruption, subject to the approval of the EU Commission, Parliament and Council.
In its advice to the EU regarding the US, ESMA said there are no significant obstacles which would impede the application of the AIFMD passport for funds marketed by managers to professional investors. However, ESMA determined that in the case of funds marketed by managers to that involve a public offering, an AIFMD passport risks an unlevel playing field between EU and non-EU fund managers.
Similarly in its guidance on Australia, ESMA was generally positive, but expressed some reservations. ESMA wants the Australian regulatory framework to extend the 'class order relief' provision to all EU member states.
For Hong Kong and Singapore ESMA concluded that there are no significant obstacles in extending the AIFMD passport for funds domiciled in these jurisdictions. However, the regulator did not consider whether fund managers based in these financial hubs should be afforded the passport.
Now that ESMA has delivered its advice the European Commission must act within three months, specifying the date on which the new third country passporting rules will apply. ESMA, has however said, that the EU might consider waiting until ESMA has delivered positive advice on more countries before triggering the extension of the passport to non-EU countries.
ESMA has already drawn up a list of other non-EU countries that might be included in an assessment, these are: Bahamas, Brazil, British Virgin Islands, Curacao, Mexico, Mauritius, South Africa, South Korea, Thailand, and the US Virgin Islands.
As such the timetable for implementation of the extension of the AIFMD passport to non-EU countries is unclear at this stage.