June 16, 2021

Cayman Finance Statement on ESMA’s AIFMD Passport Advice

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Jude Scott_2013Posted on July 31, 2016

With the news today from the European Securities and Markets Authority (“ESMA”) deferring its recommendation to the European Commission (“EC”) that the Cayman Islands (along with several other countries) be considered for a “third country passport” under the Alternative Investment Fund Managers Directive (“AIFMD”), Cayman Finance CEO Jude Scott, stated that:

“Given the large number of alternative investment funds domiciled in Cayman, we play a critical role in the success of the global economy. Cayman has also been recognized for decades as a strong partner of EU members and other states in combatting corruption, money-laundering and tax evasion because we meet or exceed all globally-accepted standards for transparency and cross border cooperation and regulation. Our leadership on international standards compliance includes the introduction of the tax information exchange and co-operation agreements with EU regulators required by the AIFMD, as well as the development of our own new AIFMD-compliant legislation. We had hoped that this exceptional record should have been sufficiently good grounds to enable Cayman to be favorably reviewed by ESMA at this point in time.

When considering the Cayman Islands, ESMA’s advice was that there were no significant obstacles regarding competition and market disruption impeding the application of the AIFMD passport to the Cayman Islands; but ESMA advised that it could not provide its final advice in relation to certain other aspects of its criteria at this stage. Having reviewed the advice, we believe the Cayman Islands Monetary Authority and Government can work constructively with ESMA and address the points that ESMA has raised in a much shorter time frame than ESMA suggested in its advice. We are confident that Cayman can satisfy those points and be deserving on any objective basis of an extension of the AIFMD passport to the Cayman Islands in the near future.

ESMA’s decision to defer giving an unqualified positive opinion on 7 out of the 12 countries (including the Cayman Islands, the US, Australia, Hong Kong and Singapore) reviewed so far suggests that it will be difficult for the EU to turn on the AIFMD passport for Third Countries at this stage. Indeed, ESMA themselves recommend a further delay in the activation of the Third Country passport to allow their work, including in relation to the Cayman Islands, to be completed. Consequently we expect the status quo to continue and that Cayman funds will continue for the time being to be marketed into the EU using existing national private placement regimes (“NPPRs”) as they have in the past and for the foreseeable future.”

The Cayman Islands is and will continue to be a premier global financial hub, connecting law-abiding users and providers of capital and financing from the EU and around the world. The Cayman Islands are home to over 11,000 regulated investment funds, many thousands of private equity funds and international commercial asset financing transactions, with the world’s top managers using Cayman Islands vehicles in their structures.

Cayman Finance CEO Jude Scott also commented that “The Cayman Islands Government, the Cayman Islands Monetary Authority and the Cayman Islands financial services industry all recognize Cayman’s critical role in the success of the global financial economy and global alternative investment funds market, and are committed to a best-in-class legal and regulatory regime to meet the current and future needs of investors and managers around the world.”

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