AIFMD passport and third country AIFMs and AIFs

ESMA consults on extending the EU passport to non-EU managers and funds

On Friday 7th November 2014, the European Securities and Markets Authority (ESMA) issued a ‘Call for Evidence’ as the first step in its process of considering whether to extend the AIFMD EU passport to non-EU managers and non-EU funds.


EU managers can market their EU funds across Europe using a ‘passport’. On the other hand, non-EU managers and non-EU funds are subject to separate national private placement regimes (NPPR) in each member state.
The Alternative Investment Fund Managers Directive (AIFMD) allows for the possibility for this passport to be extended to managers currently subject to NPPR if ESMA so recommends to the European Commission, the European Parliament and the Council of Europe by July 2015. ESMA must also give its opinion on the functioning of both the EU passport under AIFMD and NPPR. If ESMA recommends an extension of the passport, the European Commission will, by October 2015, set the date from which the extended passport will apply.  

Call for Evidence

This Call for Evidence by ESMA is part of its research into whether to extend the passport. In order to be able to issue a positive opinion and positive advice regarding an extension ESMA must be convinced that “no significant obstacles regarding investor protection, market disruption, competition and the monitoring of systemic risk” impede the application of the passport.

In coming to its conclusion, ESMA must consider the following aspects in relation to the relevant non-EU countries:

  • Investor protection - particularly the ease of co-operation between the EU and the non-EU authorities; any obstacles that impede an EU National Competent Authority (eg the UK’s Financial Conduct Authority or the Central Bank of Ireland) from performing its supervision duties in a non-EU country; or any issues of investor protection.
  • Risk of market disruption or distortion of competition which would dis-advantage the EU fund industry vis-à-vis the fund industry of the non-EU countries taking into account the regulatory environment.
  • Monitoring of systemic risk.

The Call for Evidence asks industry participants 29 questions on the functioning of both NPPR and the current passport for EU managers, as well as the co-existence of both systems. ESMA seeks feedback on participants’ experience of each system, any difficulties encountered, any barriers to entry and whether there were any issues of investor protection.

ESMA also seeks stakeholders’ views on the possible impact of the extension of the passport on competition and on risk in the industry, and seems particularly concerned about reciprocity between the relevant non-EU country and EU member states. There are several questions in the paper regarding equivalence of access to investors, standards of investor protection and ease of establishment or registration.

The Call for Evidence highlights that ESMA’s advice will distinguish between various non-EU countries based on the above factors and only the non-EU countries which fulfil those criteria will benefit from the extension of the passport.

Next steps

Responses must be submitted to ESMA by 8 January 2015. 

AIFMD next steps
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