ESMA completes first assessments of countries seeking AIFMD passport

The European Securities and Markets Authority (ESMA) has issued an initial list of countries it recommends are suitable to secure the EU’s Alternative Investment Fund Managers Directive (AIFMD) passport.

So far ESMA, has assessed six jurisdictions out of more than 40 it is expected to assess in relation to the passport extension.

Following the first six assessments, it said that no obstacles exist to the extension of the passport to Guernsey and Jersey, while Switzerland will remove any remaining obstacles with the enactment of pending legislation.

But no definitive view has been reached on the other three jurisdictions – Hong Kong, Singapore and the US – due to concerns related to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria, it said.

Wayne Panton, Cayman’s Minister of Financial Services said Cayman’s Legislative Assembly, is considering amendments that will facilitate the extension of the AIFMD passport.

Panton commented: “In our 10 July advisory to the financial services industry, the ministry outlined two amendment bills that will establish an opt-in regime for regulating Cayman-domiciled investment funds and managers connected to the European Union (EU). We expect this will satisfy ESMA requirements and strongly position us for a positive assessment.”

ESMA has recommended that prior to activating the relevant provision in the AIFMD extending the passport to these jurisdictions the European Commission, Parliament and Council “may wish to consider waiting until ESMA has delivered positive advice on a sufficient number of non-EU countries, before introducing the passport in order to avoid any adverse market impact that a decision to extend the passport to only a few non-EU countries might have,” which Panton deemed as “fair and appropriate”.

Currently, Cayman’s investment funds are marketed in the EU under national private placement regimes (NPPRs). The NPPR and passport regimes will coexist until at least 2018, when ESMA will have decided whether or not the passport regime should replace NPPRs.