The European Securities and Markets Authority has approved co-operation arrangements between EU securities regulators, with responsibility for the supervision of alternative investment funds including hedge funds, private equity and real estate funds, and 34 of their global counterparts.
ESMA has negotiated memorandums of understanding on behalf of the 27 EU member states’ securities regulators, including Luxembourg’s CSSF, as well as their counterparts from Croatia, Iceland, Liechtenstein and Norway as members of the European Economic Area.
The co-operation arrangements will help EU regulators to supervise efficiently the way non-EU alternative fund managers comply with the rules of the Alternative Investment Fund Managers Directive.
They are a precondition of allowing non-EU managers access for their funds to EU markets or to perform fund management functions on behalf of EU managers; and of EU managers being allowed to delegate depositary and other functions to service providers outside the union.
These arrangements take effect from July 22, the deadline for AIFM Directive adoption into the national law of EU member states, and will facilitate the exchange of information, cross-border on-site visits and mutual assistance in the enforcement of the regulatory rules.
They will apply to non-EU managers that manage or market alternative funds within the EU and to EU fund managers that manage or market EU-domiciled alternative funds outside the union. The arrangements also cover co-operation required for the cross-border supervision of depositaries and other entities to which alternative managers delegate functions.
The agreements will enable EU and non-EU authorities to supervise fund managers that operate on a cross-border basis both within the union and outside. EU regulators will be able to share relevant information received from their non-EU counterparts with other EU regulators, ESMA and the European Systemic Risk Board, subject to appropriate safeguards.
While ESMA has negotiated the MoUs centrally, they are bilateral agreements that still need to be concluded individually between each EU regulator and non-EU regulators. Since the actual supervision of alternative fund managers is undertaken by national regulators, it is up to each regulator to decide with which non-EU authorities it wishes to sign an MoU. The CSSF has signed an MoU with each of the 34 regulators that has negotiated an agreement with ESMA.
The first batch of agreements concluded by ESMA are with the securities regulators of Albania, Australia, Bermuda, Brazil, the British Virgin Islands, Canada (the provincial regulators of Alberta, Quebec and Ontario as well as the Superintendent of Financial Institutions), the Cayman Islands, Dubai, Guernsey, Hong Kong (Hong Kong Monetary Authority and Securities and Futures Commission), India, the Isle of Man, Israel, Jersey, Kenya, Malaysia’s Labuan Financial Services Authority, Mauritius, Montenegro, Morocco, Pakistan, Serbia, Singapore, Switzerland, Tanzania, Thailand, the United Arab Emirates and the United States (Federal Reserve Board, Office of the Comptroller of the Currency and Securities and Exchange Commission).
The most notable omission from the list is the US Commodity Futures Trading Commission. However, ESMA says it will continue to negotiate MoUs with further non-EU countries with the aim of beating the July 22 deadline.