European Commission opens public consultation to review the AIFMD

Following publication of the European Commission’s report on AIFMD to the EU Council and Parliament in June this year (see our earlier briefing here) the Commission has now opened a public consultation for further review of the AIFMD. The purpose of the consultation is to gather views on how to achieve a more effective and efficient functioning of the EU AIF market and to test market appetite for potential changes to the AIFMD.

The consultation can be found here.

The consultation is wide-ranging and covers a broad range of subject areas. Although some of these will be less relevant to the funds industries of Jersey, Guernsey and Cayman, there are important consultations on improving the utility of the AIFMD passport (currently unavailable to non-EU managers) and securing a wider choice of funds for certain EU investors (such as those in Italy and Spain where restrictive national regimes limit the ability of domestic investors to access funds that are not marketed under an AIFMD passport). The outcome of these consultations could be of significant importance tothe ability of Jersey, Guernsey and Cayman based fund managers to interact with European investors over the coming years.

Despite a section of the consultation purporting to have a specific focus on “the appropriateness of the AIFMD third country passport regime”, and notwithstanding the findings of the Commission's June 2020 report, there is not a single question directly addressing this feature of the AIFMD.

It seems that the Commission’s priority is on protecting EU managers from perceived unfair competition from non-EU managers who are not subject to the AIFMD rather than offering equivalent access to non-EU funds for European investors. For example, responses are invited on the question of whether the AIFMD should apply to non-EU entities performing delegated functions for an EU manager (the need for enhanced external delegation limits having been flagged in ESMA's August 2020 letter to the Commission). Query whether this approach is influenced by concerns with third country sponsors' ability to use EU host AIFM structures from outside the EU, a vexed issue for some UK sponsors post-Brexit? If it becomes harder for UK and other third country sponsors to use EU structures in future, might they be better-served targeting their global investor base through fund and management entities domiciled outside the EU?

The consultation closes on 29 January 2021. Mourant, along with other member firms, will be working with the relevant industry bodies to submit responses from the perspective of the offshore funds industry. Please let us know if you have any comments that you would like to contribute to those consultation responses.