In brief
The European Securities and Markets Association has published its initial advice and opinion on the functioning of the marketing passport and national private placement regimes since the implementation of AIFMD, and the possibility of extending the marketing passport to non-European fund managers. Although the scope of the advice is limited, the key takeaways are that the introduction of a marketing passport for Australian fund managers and the abolition of national private placement regimes still look to be some way off. Partner Marc Kemp, Senior Overseas Practitioner James Kanabar and Law Graduate Sophie Allchurch report.
Introduction
The Alternative Investment Fund Managers Directive (AIFMD) (see our Impact of EU AIFM Directive on Australian Fund Managers) contains two hardwired dates by which the European Securities and Markets Association (ESMA) is required to report and/or opine on the functioning of the marketing and national private placement regimes:
- by 22 July 2015, a report on the functioning of marketing by European and non-European fund managers under AIFMD, and advice on the possibility of extending the marketing passport to non-European managers; and
- by 2018, a recommendation as to the desirability of maintaining national private placement regimes (NPPRs) as an avenue for non-European managers to access capital from European investors (the alternative being full compliance with AIFMD).
ESMA yesterday issued its 2015 report. ESMA's advice in respect of non-European managers is limited by the fact that it has only assessed six jurisdictions (and notably not Australia). Similarly, ESMA notes in its opinion that delays in the implementation of AIFMD into national law (despite a July 2013 deadline, some countries are still to implement) make a definitive assessment difficult, with ESMA endorsing the preparation of another opinion at a later (but, as yet, unspecified) date. However, ESMA's statements do provide some points of interest for Australian fund managers, which are discussed below.
Introduction of a marketing passport for non-European managers
For Australian fund managers seeking to access European capital, the options are currently limited to reliance on the exemption for passive marketing (which is construed narrowly and should therefore be treated with extreme caution), or compliance with local private placement regimes, to the extent they exist in each European Economic Area member state (see our Impact of EU AIFM Directive on Australian Fund Managers). An extension of the marketing passport to Australian fund managers would allow much greater access to European capital, albeit at the cost of full compliance with AIFMD (including reporting requirements, remuneration restrictions and disclosure obligations, and the appointment of a depositary).
The jurisdictions addressed by ESMA's advice were chosen based on a number of factors, including current levels of activity under the national private placement regimes. ESMA's advice in respect of Guernsey, Jersey and Switzerland is favourable, while the regulator cites insufficient evidence to make a determination in respect of Hong Kong, Singapore and the United States. ESMA's next step is to finalise its review in respect of those three jurisdictions, and to assess a secondary list of jurisdictions it has identified, including Australia. ESMA has given no indication as to the timing for those assessments.
Under AIFMD, the European Commission is required to extend the passport to non-European managers within three months of receiving positive advice from ESMA. However, ESMA has stated that its advice 'cannot be considered positive' and suggests a moratorium until it has delivered positive advice on a significant number of non-European jurisdictions (again, while providing no indication of timing). All of this means that, while precise timing is uncertain, it is highly unlikely that Australian fund managers will be permitted to apply for a pan-European marketing passport in the near future.
Functioning and continuation of the national private placement regimes
For non-European managers seeking to access European capital, the most viable option is to make use of existing NPPRs, noting that, as a result of gold-plating in the implementation of AIFMD into national law, this avenue is not readily available in certain European member states. The requirements for reliance on the NPPRs vary from jurisdiction to jurisdiction, but typically involve an application to the relevant regulator, upfront and ongoing disclosure requirements, and periodic reporting (see our Impact of EU AIFM Directive on Australian Fund Managers).
In its advice, ESMA has concluded that there is insufficient evidence to indicate that NPPRs have caused major issues to the implementation and functioning of AIFMD. Some Australian fund managers with European investors may disagree! Nonetheless, while ESMA's opinion does not provide a definitive answer on the future of the NPPRs (without which Australian fund managers would be forced to fully comply with AIFMD in order to access European capital), ESMA's advice might be helpful in encouraging continuing support for the existence of NPPRs up to 2018 and, possibly, beyond.
Summary and recommendations
While there are some interesting clues to be gleaned from ESMA's advice and opinion regarding the future impact of AIFMD on Australian fund managers, there is more uncertainty than certainty and it is very much a case of watching this space. We will provide an update when the picture becomes clearer.