The seven jurisidiction with the strongest recommendations are Canada, Guernsey, Jersey, Japan, Switzerland, Hong Kong and Singapore.
In its official advice to the European Commission, published on Tuesday, Esma says investor protection, market disruption, competition and the monitoring of systemic risk in the seven fund domiciles are all up to EU standards.
Qualified approval has been given to the US and Australia, with more significant questions raised about Cayman Islands and Bermuda, while for the Isle of Man Esma noted that it did not have in place any AIFMD-like regime.
The European Commission, Council and parliament, must now consider Esma’s advice and decide whether to extend passporting rights to these financial centres outside the EU.
Slow progress
Esma initially recommended that Guernsey, Jersey and Switzerland be given access to the Alternative Investment Fund Managers Directive (AIFMD) passport scheme in July 2015, but then said it needed more time to complete the assessment for the US, Singapore and Hong Kong.
It revealed in October last year that it was also assessing a second wave of six countries for acceptance into the scheme. This group comprised of Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia.
Olivier Guersent, director general at the EU Commission’s financial services division, wrote to Esma in December urging it to complete those assessments by 30 June this year.
This now looks to have completed but without unconditional approval for all the applicants.
Mariana Enevoldsen, director of Heritage International Fund Managers, which provides fund managers with fund administration services from Guernsey said the latest recommendations from Esma would be positive for the island as it streamlines access to the EU.
“However, the news is also a bit disappointing, as no timetable has been set for the granting of passporting rights.”
Post-Brexit passporting
The advice by the regulator also suggests that alternative investment funds domiciled in the UK would retain passporting rights post-Brexit. Since the UK has, up until now, implemented all relevant EU legislation, it should expect a positive advice from Esma.
Esma’s advice only concerns funds regulated under the AIFMD. It doesn’t concern Ucits fund.
However, the regulator’s stance implies it is theoretically possible to extend passporting rights to jurisdictions outside the European Economic Area. That in itself must give the Brexiteers some hope they could secure fund passporting rights for Ucits funds after leaving the European single market.
