The European Securities and Markets Agency (ESMA) recently listed three countries which it said should be granted access to the marketing ‘passport’ under the Alternative Investment Fund Managers Directive (AIFMD) after completing an investigation which began late in 2014.
The three were Jersey, Guernsey and Switzerland although ESMA said the Swiss government still needed to pass additional legislation before being recommended.
Singapore, Hong Kong and United States failed to gain ESMA’s recommendation on competition and regulatory grounds, along with a lack of sufficient evidence. Another batch of countries is expected to be named next year as the EU body works its way through a list of 21 countries currently under consideration.
John Verwey, special regulatory counsel with law firm Proskauer in London, said that with only three jurisdictions gaining a recommendation, for the majority of non-European managers seeking to market funds in Europe, ESMA’s advice means that there is no real change to the status quo.
“It remains to be seen if the EU Commission, Council and Parliament will decide to extend the marketing passport to Guernsey, Jersey and Switzerland in the short term and if they do what transitional provisions may be made available.
“The EU may want to delay extension of the passport for even these three subject to there being a larger number of jurisdictions first,” he said.
ESMA for its part rejects any suggestion of a reluctance to act arguing that a lot of work goes into examining each of the jurisdictions.
“To say we’re reluctant to grant permission, I‘d reject that,” a spokesman for the regulatory body said.
“We’re hoping to deliver the next tranche early in 2016,” he said.
Currently non-EU AIF managers looking to market their funds across the EU must comply with national private placement regimes (NPPR) in each of the separate EU countries.
These requirements differ between countries with some, such as the UK and Luxembourg, having relatively light requirements, while others, like France and Germany, have more extensive requirements. In some countries, like Italy, marketing AIFs under the NPPR is not available at all.
Verwey says the overall impact of the AIFMD so far has been impose a significant regulatory burden on AIF managers, which has limited the access that non-EU AIFMs have to European investors.
“Non-EU Managers marketing into the EU are already subject to the NPPR compliance burden; to be able use the marketing passport these managers would first need to become fully authorised under the AIFMD, which would increase the compliance burden even further,” he said.
Given this burden and the option AIF managers have to market products in other regions such as Asia, Verwey said the best outcome would be for the EU to speed up the implementation of the marketing passport and keep open the option of being able to use the NPPR scheme.
