ESMA deal opens AIFMD door for alternative funds marketing into EU from 34 jurisdictions

The Alternative Investment Funds Management Directive (AIFMD) restricts the ability of managers of non-EU funds to market in the EU. Marketing is allowed for funds that comply with the AIFMD and associated rules and where an agreement is in place between EU member state financial regulators and the financial regulators of the country in which the fund is based.

EU financial regulator the European Securities and Markets Authority (ESMA) has announced that it has approved co-operation agreements between the financial regulators in 34 territories and all 27 EU member states, plus Croatia, Iceland, Liechtenstein and Norway.

The deal will allow countries in the EU to market funds in those 34 territories. The countries that ESMA has agreed the arrangement with are: the British Virgin Islands; Cayman Islands; Isle of Man; Guernsey; Jersey; Canada; Australia; Brazil; Switzerland; US; Dubai, and Hong Kong.

The arrangements, known as memorandums of understanding (MoUs), will also apply to EU alternative investment fund managers seeing to market alternative investment funds in these third countries.

The agreements mean that EU and non-EU authorities will be able to supervise fund managers that operate on a cross-border basis. They open the way for co-operation between authorities on the exchange of information. Although ESMA has negotiated the arrangements centrally, they are bilateral agreements that must be signed between each EU securities regulator and each non-EU authority.

"The release of the MoUs finally provides further clarity on where a non-EU AIF may be marketed within the EU. As the implementation date fast approaches, this information will allow firms to review and finalise any plans they have for future fund establishments," said Monica Gogna, a financial services regulation expert at Pinsent Masons, the law firm behind Out-Law.com.