Law firm Dillon Eustace says that the Cayman Islands are prepared for an extension of the marketing “passport” for alternative investment funds, despite reticence from the European Securities and Markets Authority (Esma) in approving the region.
Derbhil O’Riordan, a partner at the firm with a focus on the Cayman Islands, says the area is “taking some very significant steps towards making itself ‘passportable’”.
The passport, which comes alongside compliance with the Alternative Investment Fund Managers’ Directive (AIFMD), is vital for hedge fund managers looking to market their funds throughout Europe.
“We’ve got two new laws put in place, which will provide an opt-in regime for Cayman funds that wish to take advantage of the AIFMD regime once the passport is extended here,” she adds.
O’Riordan says that the Cayman funds that are currently taking advantage of the National Private Placement Regime are already confident in handling reporting and transparency requirements and have systems in place to comply with many elements of the directive.
“I think probably there are going to be more challenges when we’re looking at the extension of the passport around supervision and whether you can be sure that, for example, safeguarding of assets, the function of the depositary and those kind of provisions are put in place.
“But my understanding is that CIMA [the Cayman Islands Monetary Authority] is looking at this all very carefully at the moment and is getting ready to ensure that it can satisfy Esma and the Commission of the fact that it will have the right provisions in place."
In August, the Alternative Investment Management Association (Aima) also came forward to support the Cayman Islands bid to gain the European marketing passport for offshore hedge funds, saying the region is well placed to get a successful review.
Esma’s verdict in July only approved three additional regions for a potential extension of the AIFMD passport.
The authority said that Jersey and Guernsey presented no barriers and that Switzerland would also be ready, following the implementation of the correct legislation.
At Ticino for Finance, the association for the promotion of the finance in the Canton of Ticino, the third main Swiss financial centre, chairman Franco Citterio says the group is “very pleased” with the Esma verdict on Switzerland.
“Access to the European passport has the potential to provide a competitive advantage for the Swiss financial centre compared to jurisdictions outside the EU which have not received the same favourable opinion, starting with the United States and Singapore,” he says.
He adds that the decision recognises the success the recent revision of the Collective Investment Schemes Act (CISA), one of the cornerstones of which was harmonisation with European legislation.
“ESMA explicitly recognised the substantial efforts made by Switzerland (together with Jersey and Guernsey) to adopt the AIFMD legislation in their national legal system.”
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