Thursday, September 26, 2013

ESMA Reaches Cooperation Agreements with US and Other non-EU Jurisdictions for Hedge Fund Regulation

The European Securities and Markets Authority has approved seven co-operation arrangements between EU securities regulators and their global counterparts with responsibility for the regulation of alternative investment funds, including hedge funds, private equity and real estate funds. ESMA approved Memoransum of Understanding with authorities from the Bahamas, Japan, Malaysia, Mexico and the United States, including the Commodity Futures Trading Commission.

The co-operation agreements allow for the exchange of information, cross-border on-site visits and mutual assistance in the enforcement of respective supervisory laws. The agreements cover third-country hedge fund and other alternative investment fund managers that market alternative investment funds in the EU and EU fund managers that manage or market hedge funds outside the EU. The agreements also cover co-operation in the cross-border supervision of depositaries and hedge fund managers’delegates.

Hedge Fund Regulation. National securities regulators in the EU, as hedge fund regulators, are in the process of signing MoUs with those jurisdictions relevant to their market. The existence of co-operation arrangements between the EU and non-EU authorities is a precondition of the Alternative Investment Fund Managers Directive (AIFMD) for allowing managers from third countries access to EU markets or to perform fund management by delegation from EU managers by July 22, 2013.

The co-operation arrangements are applicable from 22 July, and will enable cross-border marketing of AIFs to professional investors between jurisdictions. This is subject to the non-EU jurisdiction not being listed as a non-cooperative jurisdiction by the Financial Action Task Force and, as from the entry into force of the passport for non-EU managers, having co-operation agreements in place with EU Member States regarding the exchange of information on tax matters.

The content of the ESMA MoUs follow the IOSCO Principles on Cross-Border Supervisory Co-operation of 2010, and complements the terms and conditions of the IOSCO Multilateral MoU Concerning Consultation and Co-operation and the Exchange of Information of 2002 (MMoU).