Passports low priority for European Commission

Efforts to break down barriers to cross-border fund investment and centralize regulatory supervision of fund managers will precede the introduction of a passport granting non-EU fund managers access to investors in the bloc, according to the European Commission’s head of asset management.

 Speaking at the 7th Annual Private Equity Forum in London on Tuesday, Sven Gentner said European policymakers will not take a decision on granting Alternative Investment Fund Managers Directive passports until “the right level of supervision” is in place across the EU.

“The Commission continues to work on third-country passports, but they need to assess the full impact of granting them to ensure the AIFMD regime is safeguarded,” he said.

The Commission is currently assessing the supervisory powers of EU regulators, including the European Securities and Markets Authority, with a view to increasing their powers over national regulators on matters such as assessing cross-border fund marketing prospectuses, he said.

“There are certain areas in which centralized and common supervision is more effective, would help break down barriers to cross-border fund investments, and would help create a more level playing field,” he said.

The assessment follows an analysis conducted by the Commission that found that national regulators interpreted the requirements of the AIFMD differently, and implemented varying requirements for non-domestic managers looking to do business in their countries.

For UK managers, who will lose the right to automatically market their funds in the UK after Brexit, he said access will depend on the country’s future relationship with the EU, but that the current option open to third countries, national private placement regimes, will remain in place for the foreseeable future.

 “NPPRs are not going away. EU equivalence is in place, but this is decided on a sector by sector basis. Equivalence will only be granted to a sector in the case that doing so will have a positive impact on the EU and will not have a negative economic impact. I cannot speculate further,” he said.

 He added that the Commission is in “no rush” to conduct a detailed review of the AIFMD itself, which was originally scheduled to take place in 2017. It has contracted out an analysis of the efficacy of the directive, which has so far produced “a lot of information” and has not indicated that any legislation is needed to improve it.

“Throughout the first half of next year we will continue to talk to stakeholders, and toward the end of the year we will launch a more targeted review,” he said. ​