Cayman Finance, the promotional body for the Cayman Islands financial services industry, has said it hopes the European Securities and Markets Authority (ESMA) will be able to hasten its decision on granting third country passport to Cayman Islands Alternative Investment Fund managers and a decision can be made in a shorter time period than ESMA has suggested.
ESMA revealed in July that it was to delay its recommendation to the European Commission on whether to grant a third country passport to Cayman Islands Alternative Investment Fund managers under the Alternative Investment Fund Managers Directive (AIFMD), partly due to the fact that Cayman is in the process of implementing a new regulatory regime.
Passporting would allow fund managers in Cayman to do business throughout the European Union. Without a passport, fund managers have to apply to each EU country to do business.
The regulator said in a statement that it cannot yet give definitive advice with respect to the criteria on investor protection and effectiveness of enforcement since Cayman is in the process of implementing new regulatory regimes and the assessment will need to take into account the final rules in place.
Specifically, it said it is awaiting two changes from the Cayman Islands Monetary Authority (CIMA). First is a legislative amendment to give CIMA the power to impose administrative fines for regulatory breaches without having to bring the matter to court. The second change is that CIMA is currently working on a better system for risk monitoring.
The authority did, however, advise the European Commission grant passports to Canada, Guernsey, Japan, Jersey and Switzerland. It deferred decisions on the Cayman Islands, Bermuda, the US, Hong Kong, Australia, Singapore and the Isle of Man.
Jude Scott, the chief executive of Cayman Finance, stressed in a statement that Cayman has been recognized for decades for its leadership on international standards compliance including the introduction of the tax information exchange and co-operation agreements with EU regulators. It has also developed its own new AIFMD-compliant legislation.
“We had hoped that this exceptional record should have been sufficiently good grounds to enable Cayman to be favorably reviewed by ESMA at this point in time,” Scott said.
He noted that ESMA said there were no significant obstacles regarding competition and market disruption impeding the application of the AIFMD passport to the Cayman Islands and that he believes CIMA and Government can work with ESMA to address the points that ESMA has raised in a much shorter time frame than ESMA suggested in its advice.
“We are confident that Cayman can satisfy those points and be deserving on any objective basis of an extension of the AIFMD passport to the Cayman Islands in the near future,” he said.
The delay means that the current national private placement regime will stay in place until at least 2018, designed to coexist with the new passport regime.
Cayman Finance, Cayman Islands, Europe, Cayman Islands Monetary Authority, Investment funds, Alternative Investment Fund Managers Directive