On 18 July 2016, the European Securities and Markets Authority (ESMA) published its advice on the application of a third country passport to certain non-EU countries in which it confirmed that there are no obstacles impeding the application of the Alternative Investment Fund Managers Directive (AIFMD) passport to Guernsey along with four other jurisdictions (Canada, Japan, Jersey and Switzerland).
However, it has subsequently become clear that the timing of a final Brexit agreement between the UK and the remaining EU members is expected to extend far beyond the initial two year period following the UK government’s invoking of Article 50.
As a result, the likelihood of the EU extending the AIFMD passport to third countries appears remote until the UK and EU have reached a trade agreement for the financial services sector, hence it appears probable that National Private Placement Regimes (“NPPRs”) will need to remain in place for the foreseeable future.
The continuation of NPPR will be popular with GPs who have no requirement to market on a full pan-EEA basis as it means that they can continue to target their primary markets in the region on an individual basis using NPPR, thus making marketing simpler and significantly reducing the subsequent costs and disclosure requirements applicable under the directive.
Indeed, since the creation of the passport, GPs have continued to fund raise successfully using NPPR in the following key investor jurisdictions as opposed to using the passporting regime:
Martin Scott, Director of IAG Private Equity Limited, commented, “Whilst the Brexit vote has undoubtedly created uncertainty in the investment fund sector, the likely continuation of the popular and straightforward National Private Placement Regimes could provide an opportunity for fund raising by reducing the marketing costs and easing the reporting burden for GPs until an agreement on financial services is in place between the UK and the EU.”
We will continue to follow developments and advise our clients accordingly.