From Cayman Islands Government

The European Securities and Markets Authority (ESMA) today issued its initial set of recommended countries for the EU’s Alternative Investment Fund Managers Directive (AIFMD) passport.

Of the more than 40 jurisdictions that ESMA is expected to assess in relation to the passport extension, to date it has assessed six.

‘The Advice concludes 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. No definitive view has been reached on the other three jurisdictions due to concerns related to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria’, ESMA’s announcement reads.

Prior to activating the relevant provision in the AIFMD extending the passport to these jurisdictions, ESMA noted that 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’.

ESMA also ‘aims to finalise the assessments of Hong Kong, Singapore and the USA as soon as practicable and to assess further groups of non-EU countries until it has provided advice on all the non-EU countries that it considers should be included in the extension of the passport’.

In Cayman, Minister of Financial Services Wayne Panton noted that Cayman’s Legislative Assembly will consider amendments in August that will facilitate the extension of the AIFMD passport.

‘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)’, he said. ‘We expect this will satisfy ESMA requirements and strongly position us for a positive assessment’.

He also noted that ESMA’s advice that the European Commission, Parliament and Council wait for a sufficient number of recommendations before introducing the passport is ’eminently fair and appropriate’.

Cayman’s investment funds currently are marketed in the EU under national private placement regimes (NPPRs). The NPPR and passport regimes will coexist until at least 2018, by which time ESMA will have decided, and acted upon, whether or not the passport regime should entirely displace NPPRs.

Minister Panton acknowledged that through AIFMD, Cayman intends to strengthen and expand its EU presence. ‘We are a global leader in investment funds, and we intend to build on our market dominance with our new AIFMD regime as the platform upon which Cayman will pursue further growth in our share of the EU’s investment funds sector’.

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Cayman Finance welcomes ESMA statement

Following a Cayman Finance statement issued on 10 July 2015, Cayman Finance is pleased to see yesterday’s release from the European Securities and Markets Authority (ESMA) announcing that they are moving forward with assessments and recommendations in regards to the extension of the AIFMD Passport to non-EU AIFMs and AIFs.

“We are happy to see this formal recommendation process started, where ESMA is committed to taking an objective and transparent approach to reviewing and recognising jurisdictions around the world who play such an important role in the global investment funds market and we look forward to ESMA reviewing and assessing Cayman’s carefully developed AIFMD regimes” said Cayman Finance CEO Jude Scott.

The Cayman Islands remains committed to working very closely with ESMA as it develops the additional AIFMD regimes as an extension of its already successful investment funds platforms. In the meantime, Cayman Islands investment funds continue to be marketed into Europe utilising existing national private placement regimes.

Cayman Finance is also pleased to see ESMA’s recommendation to the European Parliament, Commission and Council that they “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.”
For EU investors, having access to the Cayman Islands’ global leading investment funds platform provides them with access to investment options across a diverse range of investment products and strategies.

Cayman Finance believes that Cayman’s AIFMD Regimes, plus on-going reciprocity, will enable Cayman to secure extension of the AIFMD passport to the Cayman Islands by the European Commission, should the Commission decide to extend passports to non-
EU countries in due course.

Cayman Finance CEO Jude Scott commented that “Cayman Finance is fully supportive of the Cayman Islands Government and the Cayman Islands Monetary Authority in their development of Cayman’s AIFMD Regimes. We all recognise Cayman’s important role in the global investment funds market and these new AIFMD Regimes are the latest example of the jurisdiction continuing to carefully evolve its legislation and regulation in a balanced and robust manner to meet the needs of investors and managers around the world without any disruption to our world class services.”

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ESMA Advice – Extension of AIFMD Passport to non-EU AIFMs and AIFs

Summary

The European Securities and Markets Authority (ESMA) has published its Advice in relation to the application of the AIFMD (Alternative Investment Fund Managers Directive) passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs) and its Opinion on the functioning of the passport for EU AIFMs and the national private placement regimes (NPPRs). The Advice and Opinion, required under AIFMD, will now be considered by the European Commission, Parliament and Council.

ESMA Advice – Extension of AIFMD Passport to non-EU AIFMs and AIFs

The Advice relates to the possible extension of the passport, currently only available to EU entities, to non-EU AIFMs and AIFs which are currently subject to EU NPPRs. ESMA conducted a country-by-country assessment, as this allowed it flexibility to take into account the different circumstances of each non-EU jurisdiction regarding the regulatory issues to be considered i.e. investor protection, competition, potential market disruption and the monitoring of systemic risk.

ESMA assessed six jurisdictions – Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the United States of America (USA) – who were selected based on a number of factors including the amount of activity already being carried out by entities from these countries under the NPPRs, EU national authorities’ knowledge and experience of dealing with their counterparts and the efforts by stakeholders from these countries to engage with ESMA’s process.

The Advice concludes 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. No definitive view has been reached on the other three jurisdictions due to concerns related to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria.

Next Steps

The Advice and Opinion have been sent to the Commission, Parliament and Council for their consideration on whether to activate the relevant provision in the AIFMD extending the passport through a Delegated Act.

However, the institutions 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.

ESMA aims to finalise the assessments of Hong Kong, Singapore and the USA as soon as practicable and to assess further groups of non-EU countries until it has provided advice on all the non-EU countries that it considers should be included in the extension of the passport.

ESMA Opinion – Functioning of the EU AIFMD passport and NPPRs

The opinion on the functioning of the EU passport and the NPPRs contains ESMA’s preliminary assessment of the operation of these two mechanisms. Its preliminary view is that, given the short time period that has elapsed since the implementation of the AIFMD in Member States, a definitive assessment of their functioning is difficult and would recommend preparing a further opinion after a longer period.

SOURCE: http://www.esma.europa.eu/content/ESMA-advises-extension-AIFMD-passport-non-EU-jurisdictions

See also iNews Cayman story in iNews Briefs today “AIMA urges progress on passport for third country jurisdictions”