MiFID II Directive Clarifies AIFM Passport Issue
The Markets in Financial Instruments Directive (2014/65/EU) ("MiFID II") came into force on 2 July 2014. It must be transposed into national law by 3 July 2016 and will apply from 3 January 2017 (subject to a small number of excepted Articles).
This marks the start of a significant regime overhaul for the regulation of investment services in Europe. However, focussing on one specific and more immediate enhancement, MiFID II also amends the Alternative Investment Fund Managers Directive (2011/61/EU) ("AIFMD") and in doing so clarifies a contentious point in relation to the passporting by AIFMs of MiFID type services on a cross-border basis within the EU/EEA.
An AIFM is authorised to manage AIFs but can also extend its authorisation, under Article 6(4) of AIFMD, to (i) manage UCITS; (ii) manage non-AIF portfolios; and (iii) carry out other non-core services, namely: investment advice; safekeeping and administration of funds; and receipt and transmission of orders in financial instruments.
It appeared that Article 33 of AIFMD restricted the activity that an AIFM could conduct on a cross-border basis to managing AIFs. This position was supported by the European Commission in its Q&A.
As an AIFM cannot obtain separate authorisation under MiFID, this position would have lead to an AIFM being able to passport its AIF management services to other EU/EEA states but not being able to provide the Article 6(4) "MiFID" services anywhere in the EU/EEA other than its home state.
With EU member states taking differing views on this issue, it was welcome that a clarification and amendment to AIFMD was agreed to be captured within MiFID II.
Accordingly, Article 92 of MiFID II amends Article 33 of AIFMD and expressly facilitates the passporting by an AIFM of Article 6(4) services into other EU/EEA states.
National implementing legislation to reflect this provision must be brought into effect by 3 July 2016 (in advance of the core MiFID II measures that are to come into effect on 3 July 2017).
In advance of national implementing measures to reflect the MIFID II amendments to AIFMD, ESMA has updated its Q&A to advocate an approach based on the aim of avoiding any measure which could jeopardise the attainment of the EU’s objectives. Hence ESMA recommends "that competent authorities accept passport notifications for the activities of the AIFM authorised under Article 6(4) of the AIFMD even before 3 July 2015."
From an Irish perspective, this is consistent with the position of the Central Bank of Ireland (as reflected in their AIFMD Q&A) whereby they have advised that they will:
- accept AIFM passport notifications from other national competent authorities where the notification includes services set out in Article 6(4) of AIFMD; and
- process notifications from Irish authorised AIFMs who intend to provide the Article 6(4) services on a cross-border basis within the EU/EEA, for which they have received an authorisation.
For further details on this topic, please contact your usual Maples and Calder contact.