Media Briefing Note: Delays to the AIFMD Marketing Passport for non-European Managers

3 August 2015

On 30 July 2015, the European Securities and Markets Authority (ESMA) published its advice on the extension of the marketing passport under the Alternative Investment Fund Managers Directive (the AIFM Directive) to non-EU fund managers, as well as an opinion on the functioning of the current marketing passport and the national private placement regimes. 

ESMA's advice concluded that:

• there are no obstacles to extending the passport to Guernsey and Jersey, and
• legislation pending in Switzerland will remove any remaining obstacles.

However, ESMA's advice did not reach a definitive view in relation to Hong Kong, Singapore and the USA, due to concerns relating to competition, regulatory issues and a lack of sufficient evidence to properly assess the relevant criteria.

Dominic Hill, a partner specialising in financial services regulation at Hogan Lovells, said:

"It will be interesting to see how the European institutions decide to move forward with the roll-out of the AIFM marketing passport for non-EU managers, but it is clear that there will be delays for at least some non-EU jurisdictions, and it is possible that the roll-out of the passport may be delayed even in relation to those jurisdictions for whom the ESMA advice was favourable."

Nicholas Holman, co-head of the investment funds group at Hogan Lovells, said:

"It is clear that fund managers in some of the most popular offshore funds jurisdictions will have to continue to rely on national private placement regimes in order to market their funds in Europe for some time to come. However, the positive overall assessment of both Jersey and Guernsey at least demonstrates a willingness on ESMA's part to seek to extend the passport regime to some of the major non-EU fund jurisdictions."


Currently, a passport is available under the AIFM Directive which enables EU-based managers of EU-established alternative investment funds to market their funds freely throughout Europe.  At present, this passport is not available where either the fund or its manager is located outside of the EU. 

The AIFM Directive envisaged that the marketing passport would eventually be available to non-EU managers and EU managers of non-EU funds, but the roll-out of the non-EU passport was subject to ESMA issuing:

• positive advice confirming that there are no significant obstacles impeding the application of the passport to non-EU funds and managers, and
• an opinion on the functioning of the existing AIFM Directive passport.

The intention was that, upon receiving positive advice from ESMA, the European Commission would have three months to adopt legislation specifying when the non-EU passporting rules would take effect. 

ESMA's advice, issued on Friday 31 July, was based on a country-by-country assessment taking into account key regulatory issues in relation to six key non-EU jurisdictions:  Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the USA. 

ESMA also intends to assess a number of additional non-EU jurisdictions including the Bahamas, British Virgin Islands, Cayman Islands, Curaçao, Mexico, Mauritius and the US Virgin Islands.

ESMA also said that a definitive assessment of the functioning of the existing passporting and private placement arrangements is difficult due to fact that the AIFM Directive was implemented fairly recently.  ESMA has therefore recommended preparing a further opinion after a longer period. 

What happens next?

ESMA's advice and opinion have now been sent to the European Commission, Parliament and Council, who will need to decide whether or to activate the non-EU marketing passport at this stage or not.  ESMA has indicated that the roll-out may be delayed until ESMA has delivered positive advice in relation to a greater number of non-EU jurisdictions, rather than the passport being extended on a piecemeal basis to only a few non-EU countries. 


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