Third-Country AIFMs: ESMA Says Slow Down


The Alternative Investment Fund Managers Directive (AIFMD) required ESMA to review, by July 2015, how the arrangements under AIFMD for marketing AIFs have worked, with an assessment of the National Private Placement Regimes (NPPR) and advice on whether to introduce a passport for non-EU AIFMs and for the marketing of non-EU AIFs. ESMA's advice urges the European Commission not to make hasty changes.


Article 67 of the AIFMD requires ESMA to issue to the European Parliament, Council and Commission:

an opinion on: how the passport has functioned for EU AIFMs managing and/or marketing EU AIFs; how EU AIFMs have marketed non-EU AIFs; how non-EU AIFMs have managed or marketed AIFs under the NPPR; and advice on the application of the passport to: the marketing of non-EU AIFs by EU AIFMs; and the management or marketing of AIFs by non-EU AIFMs. Following ESMA's views, the Commission could decide to implement a passport for marketing of non-EU AIFs and management and marketing of AIFs by non-EU AIFMs to operate initially alongside NPPR and potentially, from 2018 onwards, to replace the NPPR regime.


ESMA sought views from market participants in November 2014 and published responses it received in January 2015. Broadly, respondents:

supported the passport in principle; said the NPPR can work well and supported continuing it; noted obstacles in the current NPPR caused by differences in conditions and fees between Member States; noted that because of differing interpretations, or lack of regulatory guidance, some firms are not willing to take the risk on any contact with investors in certain Member States even where it is clear the contact is reverse solicitation; called for consistent NPPR; suggested there should be no additional fees, conditions or gold-plating; encouraged a consistent "depositary-lite" regime; and demanded clarity on the scope of "marketing" and "reverse solicitation". ESMA's ADVICE

On 30 July, ESMA published its advice and opinion, with covering letters to the EU authorities.

Main messages

ESMA's predominant view is that it is too soon after implementation of the AIFMD to give a definitive opinion on how the various NPPR have been working, and whether there should be a third-country passport, and ESMA recommends a further report after a longer period. It assessed Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the US. It concluded the passport could be extended now to Jersey and Guernsey, and also to Switzerland as legislative change there will remove any outstanding hurdles. However, it is still working through certain concerns in relation to the other three jurisdictions and wants to assess several more. In view of this, it thinks the Commission may delay extending the passport until it can introduce it for a "batch" of jurisdictions.

What ESMA assessed

ESMA chose the six jurisdictions which it felt were the most active jurisdictions in terms of marketing to EU residents, and with which many of the EU regulators are used to dealing. It assessed each jurisdiction, as required by the AIFMD, in terms of the existence and effectiveness of Memoranda of Understanding (MoUs), Financial Action Task Force assessment, investor protection, competition, potential market disruption and the monitoring of systemic risk.

ESMA explains how it has assessed each element, and the difficulties of making assessments where the third-country laws differ significantly from the AIFMD model.


ESMA explains it felt a country-by-country approach was appropriate and sets out how, despite significant work, it has reached a definitive opinion on only three of the six countries. It also points out that in some cases, its advice cannot be considered...

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