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ESMA Publishes Consultation Papers on AIFM Directive

In late August, the European Securities and Markets Authority published its second “consultation paper” on the Alternative Investment Fund Managers Directive outlining proposals for rules on supervision and third-country entities (including access to EU-based markets and investors). Public comment is due by September 23. ESMA plans to deliver its final advice to the EU Commission by November 16.

The second consultation paper covers:
• Cooperation arrangements for third country alternative investment funds (“AIFs”) and alternative investment fund managers (“AIFMs”)
• Delegation of portfolio/risk management functions to third country undertakings
• Assessment of third country depositaries
• Identifying the “Member State of reference”

Admission of third-country managers and funds to EU markets through national private placement regimes, or, after 2015, a passport regime for alternative funds will involve a framework of supervisory cooperation and exchange of information between EU regulatory authorities and their counterparts in non-EU countries.

ESMA proposes written agreements between EU member-country and non-EU based regulators to exchange information for supervisory and enforcement. As one analysis described, in ESMA ‘s view, “The agreements should impose a duty on the third-country authority to assist the EU regulator in question whether it is necessary to enforce EU or national legislation, and provide for exchange of information for the purposes of systemic risk oversight.”

There should be a single written agreement, ESMA advises, to ensure consistency rather than many different bilateral agreements. The template produced by the International Organization of Securities Commission should guide this agreement.

ESMA Chairman Steven Maijoor has acknowledged the importance of ensuring that “an effective and efficient regulatory framework is in place in Europe for the recognition of third country service providers.”

The first consultation paper (July 13) contains draft advice on other implementing measures to align proposed solutions as much as possible with existing provisions of the UCITS directive, CRD, and MiFID. Comments on more than 70 questions raised from 110 draft measures are due September 13.

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