ESMA Publishes Further Advice on the Application of the AIFMD Passport for Non-EU Jurisdictions

The European Securities and Markets Authority (“ESMA”) published further advice to the European Parliament, Council and Commission on the extension of the AIFMD passport for non-EU jurisdictions on 18 July 2016.

Key Points 

• No significant obstacles impede the application of the passport to Canada, Guernsey, Hong Kong, Japan, Jersey, Singapore or Switzerland;
• Market disruption and competition are seen to be obstacles to extending the AIFMD passport to the United States, though ESMA has suggested three options that could modify the application of the AIFMD passport to certain types of funds to overcome these; 
• Investor protection is seen to be an obstacle for both Bermuda and the Cayman Islands, although this is mainly due to the legislative changes that will create an AIFMD compatible regime in these countries not yet being in force.

The decision on whether to extend the passport rests with the European Commission, subject to the right of the European Parliament and European Council to raise objections. The AIFMD envisages a three month period after the date of ESMA’s advice for the European Commission to consider that advice and adopt any delegated act extending the passport, and this delegated act will set the effective date for the extension. The European Parliament and Council then have up to six months to object. It is therefore currently unclear whether the AIFMD passport will be extended for any of the jurisdictions considered by ESMA, and if so, when the extension would be effective.

If the AIFMD passport were implemented in line with ESMA’s advice, it could pave the way for the passport to be extended to the UK after it leaves the EU.

Read "ESMA Publishes Further Advice on the Application of the AIFMD Passport for Non-EU Jurisdictions".