ESMA Publishes Opinion On AIFMD Rules Covering Late Transposition

The European Securities and Markets Authority has published on August 1 an opinion on what rules should apply to alternative fund managers and their cross-border marketing of funds where this might be affected by the failure of European Union member states to adopt the Alternative Investment Fund Managers Directive into national law on time.

According to a survey by Ernst & Young and the Alternative Investment Management Association, only 12 out of 27 member states had transposed the directive into their national legislation by July 29, a week after the formal deadline of July 22 for all countries to do so and the date of entry into effect of the AIFMD's provisions.

ESMA was obliged to take the same course two years ago in order to offer guidance to fund managers and regulators affected by the failure of several member states to adopt the UCITS IV directive on time, a particular problem given the widespread cross-border marketing of retail funds throughout the EU.

Essentially, ESMA argues that managers should not be impeded from managing or marketing funds in other EU member states simply because those countries have failed to meet their obligation to transpose the AIFMD into national law within the deadline.

ESMA notes that the failure of some member states to transpose the directive by the deadline can create difficulties where national regulators do not have the legislative framework in place to allow proper implementation of the rights and obligations conferred under the directive.

Without prejudice to any initiatives that may be taken by the European Commission regarding late transposition of the AIFMD, ESMA says its aim is to address the situation at an operational level to minimise as far as possible the impact on the fund industry and investors that might result from some countries having adopted the legislation and others not.

Specifically, it proposes practical arrangements for activities under articles 31 and 32 of the directive, covering cross-border marketing of funds by a manager with an AIFMD passport, and Article 33, regarding the management company passport, involving one member state that has not transposed the AIFMD.

ESMA acknowledges that not all situations arising from non-transposition can be accommodated by way of practical arrangements that are legally sound, but it has identified various issues that can be addressed through practical arrangements between regulators.

The first problem it highlights is where a manager...