The European Securities and Markets Authority has published – with a slight delay of six days beyond the July 22 deadline – its advice on extending access to the EU market under the Alternative Investment Fund Managers Directive to non-EU alternative investment fund managers and funds, recommending that the AIFMD passport be granted to Guernsey, Jersey and Switzerland.

ESMA has not yet reached a conclusion on whether managers and funds in Hong Kong, Singapore and the United States should also gain access to the EU market. However, it suggests holding off on any AIFMD passport extension until more jurisdictions have been assessed.

ESMA has also published its opinion on the functioning of the passport for EU alternative managers and of national private placement regimes, as stipulated by the directive. The two documents will now be considered by the European Commission, Parliament and Council, which will decide whether to activate the provision in the AIFMD allowing the passport to be extended to non-EU entities, which can currently access individual European markets under local private placement rules, via a delegated act.

ESMA says it has conducted a country-by-country assessment in order to have the flexibility to take into account the different circumstances of different non-EU jurisdictions regarding the regulatory issues to be considered, namely investor protection, competition, potential market disruption and the monitoring of systemic risk.

The authority selected six jurisdictions for assessment – Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the US – based on various of factors including the amount of private placement distribution activity already being carried out by entities from these countries and territories, the knowledge and experience of EU national regulators in dealing with their counterparts in the jurisdictions considered, and the efforts by stakeholders from these countries and territories to engage with ESMA’s process.

In its advice, ESMA concludes that no obstacles exist to the extension of the passport to Guernsey and Jersey, while Switzerland will remove any remaining obstacles with the enactment of a pending amendment to the Federal Stock Exchanges and Securities Trading Act. However, it has not reached a definitive view on the other three jurisdictions due to concerns related to competition, regulatory issues and lack of sufficient evidence to assess the relevant criteria properly.

ESMA aims to finalise the assessment of Hong Kong, Singapore and the US as soon as practicable and to assess further groups of jurisdictions until it has provided advice on all the non-EU countries and territories that it considers should be included in the extension of the passport. The jurisdictions still to be assessed are Australia, the Bahamas, Bermuda, Brazil, British Virgin Islands, Canada, Cayman Islands, Curaçao, Isle of Man, Japan, Mexico, Mauritius, South Africa, South Korea, Thailand and US Virgin Islands.

The authority says the European institutions may consider waiting to take a decision on extending the passport to non-EU jurisdictions until it has delivered positive advice on a sufficient number of non-EU countries and territories, to avoid any adverse market impact that might result from a decision to extend the passport to only a few non-EU countries.

In its opinion on the functioning so far of the AIFMD passport and of national private placement regimes, ESMA’s preliminary view is that, given the short time period since the implementation of the AIFMD as a result of the delay in implementation of the directive followed by further delays in its transposition into national law in several member states, a definitive assessment is difficult. It “sees merit” in the preparation of a further opinion on the functioning of the passport after a longer period of implementation.

However, even at this early stage, ESMA has identified a number of issues. These include divergent approaches to marketing rules, including wide differences in the fees charged by national regulators in the countries where the alternative funds are marketed, and in the definition of what constitutes a professional investor.

The authority says there are also differences in interpretation of what activities constitute ‘marketing’ and of ‘material changes’ under the AIFMD passport between different member states, and it advocates greater convergence in the definition of these terms. However, ESMA has not so far uncovered evidence to suggest that the passport has raised major issues in terms of the functioning and implementation of the AIFMD framework.

The various delays in full implementation of the directive also make a definitive assessment of the functioning of national private placement regimes difficult, and again ESMA suggests preparing a second opinion later, although this issue to lined to the decision to be taken in the meantime by the European institutions on whether to extend the passport to one or more non-EU countries or territories. In this area too it sees no evidence that the regimes raise major issues regarding the operation of the AIFMD framework.

The full text of ESMA’s opinion on the functioning of the passport and private placement regimes is available at, and its advice on extending the passport is at