Before anyone gets too excited about the extension of the passport, they should note that it is likely to be delayed until there are more eligible ‘third countries’. For the time being, the status quo will prevail and Guernsey, Jersey and Switzerland will have to wait in the wings.
What is the impact on the retail market? Principally, investment company fans can breathe a sigh of relief. Even if the national private placement regimes are eventually withdrawn, investors should still have access to Channel Islands-domiciled funds under the passport. This is good news in view of the raft of other forthcoming EU legislation that is expected to have a less positive impact on the investment trust sector, for example Mifid II.
A final word on AIFMD. It may be remembered that in certain areas, the directive had the bizarre outcome of imposing stricter rules in relation to AIFs and their managers than those that apply to Ucits and their managers. Ucits V, which is on the horizon, will bring Ucits regulation in line with AIF regulation in these areas. The impact of Ucits V remains to be seen, but is likely to be felt by managers more than investors.
Cathy Pitt is funds partner at CMS
THE REGULATOR’S VIEW
The European Securities and Markets Authority (Esma) was asked to provide advice on the extension of the AIFMD ‘passport’ to non-EU countries. In a report published on July 30, Esma noted its research had highlighted 22 non-EU countries where Alternative Investment Funds (AIFs) were domiciled and marketed into EU member states. It narrowed the list to six jurisdictions, of which only three were given positive advice. Its conclusions were:
US
In the context of a potential extension of the AIFMD passport towards the US, there is the risk of an unlevel playing field between EU and non-EU AIFMs as regards market access. Esma is of the view that the market conditions of US funds dedicated to professional investors in the EU (in the event that the AIFMD passport is extended to the US) would be different from the market access conditions of EU funds dedicated to professional investors in the US, notably due to registration requirements under the US regulatory framework (which generate additional costs).
Esma advises the European Parliament, the Council and the Commission to delay their decision on the application of the passport to the US until such time as conditions which might lead to a distortion of competition are addressed.
