A large silver lining in a not-so-dark cloud

My thoughts on ESMA’s AIFMD announcement

As has been reported widely elsewhere, the European Securities and Markets Authority (ESMA) has recommended that the passport under the Alternative Investment Fund Managers Directive (AIFMD) should be extended to fund managers based in Switzerland (upon the adoption of certain pending legislation), Jersey and Guernsey.

The fact that the Cayman Islands and the British Virgin Islands were not included in this list has come as a shock to a number of commentators, but frankly we here at Harneys were anticipating this very approach being taken by ESMA for a wide variety of reasons.

I think it is very telling that as part of ESMA’s statement, they mentioned that the European Commission, Parliament and Council may wish to consider whether to wait until ESMA has delivered positive advice on a sufficient number of non-EU countries, before introducing the passport in order to avoid any adverse market impact that a decision to extend the passport to only a few non-EU countries might have.

ESMA also noted that it aims to finalise the assessments of Hong Kong, Singapore and the USA as soon as practicable and to continue to assess further groups of non-EU countries until such time as it has provided advice on all of the non-EU countries that it considers should be included in the extension of the passport.

In other words and to cut a horribly long EU legislation driven story short; the announcement is best summarised as an unavoidable delay and certainly not defeat.

Now for the silver lining(s):

  • It is unmitigated good news that ESMA has very much opened the door to non-EU countries being able to obtain a passport.
  • This week’s developments have provided a road-map as to what non-EU countries need to do to get approval.
  • ESMA’s encouragement for the equal treatment of all relevant countries involved is a very positive outcome.

Another source of optimism for me is the work that the Regulators located in both Cayman and the BVI are doing to prepare their jurisdictions for the AIFMD passport regime. My fellow blogger Andy Morehouse wrote recently on what the Cayman Islands Monetary Authority has been doing behind the scenes and given I have the pleasure of sitting on the AIFMD Executive Committee in the BVI, I am also fully aware of the absolute commitment from the Financial Services Commission to ensure that the BVI maintains its equal footing in the industry.

Therefore, whilst of course it would have been great news for both sets of islands to be listed in the first ‘batch’, the fact that they are not is not the dire outcome some may have thought at first glance.

We will continue to provide insight into this much talked about Directive as the commentary develops, but for now, given the national private placement regimes and passport regimes will coexist until at least 2018, it is our view that there is little to be concerned about and actually much to be celebrated with this announcement.

Philip Graham
Philip is a partner and expert on offshore funds at Harneys who puts his ever increasing grey hairs down to three young children, supporting Liverpool Football Club, and being married. In no particular order.


  1. Philip, it seems you see where others do not. Always very well informed, you can always find a ray or two of light in your posts, or, indeed, a silver lining!

    1. Many thanks for the kind words Theresa and for taking the time to follow our blog. Clearly it is one of those glass half-full moments, but I was genuinely reassured by the ESMA announcement. It could have been far worse.

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