The call for evidence, issued by the European Securities and Market Authority (ESMA), looks at whether the AIFMD’s passporting regime should be extended to the management and marketing of alternative investment funds (AIFs) by non-EU alternative investment fund managers (AIFMs), and to the marketing of non-EU AIFs by EU AIFMs.
ESMA will use the evidence it has received to “determine [its] orientation” on the matter, which it will then submit to the European Commission on 22 July for consideration.
The Alternative Investment Fund Managers Directive (AIFMD) was published in the official journal of the European Union in July 2011 and aims to create a comprehensive and effective regulatory and supervisory framework for alternative investment funds and alternative investment fund managers within the EU.
It entered into force on 22 July 2013, and includes provisions for its future extension beyond the EU.
In its call to evidence, first issued in November last year, ESMA said that in order to issue positive advice to the European Commission, it must be convinced that “no significant obstacles regarding investor protection, market disruption, competition, and the monitoring of systemic risk” would impede the application of the passport to the marketing and managing of products outside the EU.
In the event that it provides positive advice, ESMA expects that the Commission will adopt a delegated act specifying the date when the EU passport would be extended to non-EU AIFs and non-EU managers within three months.
In its assessment of the evidence it has received, ESMA will look at the following criteria in relation to non-EU countries: Investor protection, obstacles that impede an EU authority from performing its supervisory duties in a non-EU country, risk of market disruption, and the potential risk of putting an EU fund industry at a disadvantage.
“It should be noted that [our] advice will not treat all non-EU countries as a single block,” it adds.
"Open to international business"
Commenting on its response to the call for evidence, Lindi Rudman, head of international funds net business at international law firm Eversheds, said: “Our work advising many non-EU managers shows us that extension of the AIFMD passport is vitally important to raising the barriers that currently exist in many EU member states for our clients looking to attract European investors.”
Eversheds funds regulatory partner, Andrew Henderson, added: “Extension of the AIFMD passport will both enhance legal certainty and offer uniform investor protections, which show that Europe is open to international business.”
ESMA is also in the process of implementing the Markets in Financial Instruments Directive II (MiFID II) into legislation.
MiFID II, which will not be fully implemented until 2016, has been designed to address the residual effects of the financial crisis by improving financial market transparency and strengthening investor protection within the insurance and investment market.
In December, ESMA introduced a wave of additional investor protection measures in its final technical advice on the implementation of the directive.