ESMA Considering Assessing Additional Countries for AIFMD Passport

The European Securities and Markets Authority (ESMA) Chair, Steven Maijoor, appeared at the Econ Scrutiny Hearing on Tuesday 13th October to discuss the possibility of extending the AIFMD passport to a second group of non-EU countries, namely Australia, Canada, Japan, the Cayman Islands, the Isle of Man and Bermuda.

Maijoor assured the European Parliament that ESMA will continue its assessment of Hong Kong, Singapore and the United States, with the intention of reaching a definitive conclusion as to whether or not the passport will be extended to these countries. He also emphasised that the regulatory authority will soon commence preparations for its vital role in the functioning of the passporting system, as well as the strengthened supervisory cooperation that will be absolutely imperative.

The Alternative Investment Fund Managers Directive (AIFMD) passport, if extended to these countries, would permit managers of alternative investment funds (AIFs) from outside of the European Union to access a much broader investment base. Countries that are not in possession of this passport are obliged to operate from an EU member (e.g. Austria, Belgium etc.)

Maijoor also confirmed that this second group of countries under consideration were “selected using the same criteria as for the first set of advice”. This criterion is composed of four factors as follows: investor protection, market disruption, competition and the monitoring of systemic risk. ESMA is expected to “issue positive advice” when there are no significant obstacles or issues with regard to this criterion.

However, Maijoor also acknowledged that ESMA was only able to “assess these jurisdictions from a regulatory standpoint, since that is clearly [their] area of responsibility and expertise”, and therefore another official body would need to take responsibility for examining issues such as fiscal matters or anti-money laundering rules.

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