Speculation over which offshore jurisdictions will gain pan-EU passport

19 May, 2015

There is speculation as to which offshore jurisdictions will benefit from the pan-EU marketing passport afforded under the Alternative Investment Fund Managers Directive (AIFMD).

The European Securities and Markets Authority (ESMA) is consulting the European Commission (EC) on which jurisdictions will have the passport availed to them. This must be completed by July 22, 2015 and the EC must then pass a delegated act within three months outlining how and when the passport will be introduced.

“Being able to demonstrate AIFMD equivalence will be a prerequisite for the passport extension. A number of non-EU countries, most notably Guernsey, Jersey and Switzerland have been quick to implement what they regard as AIFMD equivalent regimes. Nonetheless, it has been reported that the Cayman Islands Monetary Authority (CIMA) has established a taskforce to examine what a Cayman Islands compliant regime may look like,” said one provider who did not want to be named. 

The Cayman Islands is assessing whether it can create a flexible opt-in regime. A number of other offshore jurisdictions have worked to attain AIFMD compliance. Jersey and Guernsey operate dual regimes, for example. This allows managers to use the national private placement regime and continue marketing into EU jurisdictions where they have prospective investors or simply maintain the status quo and focus on non-EU investors and circumvent AIFMD. However, these regimes could be challenged if the EC elects to shut off private placement altogether. There are some schools of thought that argue ESMA has not had enough time to analyse the successes of AIFMD so could delay any decision. There is also a possibility ESMA could advise the EC to maintain private placement.

It has, however, been reported that CIMA described rumours that it would not benefit from the passport as “baseless.” Countries deemed non-equivalent could be those without a cooperation agreement with the EU or on a Financial Action Taskforce (FATF) blacklist, or one which does not adhere to the Organisation of Economic Cooperation and Development’s (OECD) tax agreements.

Whether or not non-EU managers embrace the passport is open to interpretation as well.  Many US managers are not particularly enthused about complying with AIFMD even if the marketing passport was extended to non-EU hedge funds with 90 per cent telling a Deutsche Bank Markets Prime Finance survey that they were either not interested or undecided.


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