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Industry Updates

Cayman and BVI Cooperation Agreements Approved by ESMA: Signing in Progress

01 Jun 2013

Executive Summary 

The European Securities and Markets Authority ("ESMA"), the pan-EU securities regulator, has announced approval on 22 May 2013 of the necessary cooperation agreements under the Alternative Investment Fund Managers Directive ("AIFMD"), with a list of 34 securities regulators outside of the EU.

The securities regulators in the Cayman Islands, the British Virgin Islands ("BVI") and the USA are included in the list.

The Cayman Islands Monetary Authority ("CIMA") has confirmed this in a press release dated 30 May 2013 (the "CIMA Release"), and indicated that 20 EU regulators have already signed cooperation agreements with CIMA.

This approval, and the ongoing signature process, is very good news for users of Cayman Islands and BVI vehicles, with the Cayman Islands and BVI funds industries now being ideally placed to take advantage of the ongoing availability of EU national private placement regimes, notwithstanding the coming into force of AIFMD.

Action Points

There is no immediate action to be taken in relation to the imminent entry into of the AIFMD cooperation arrangements by the Cayman Islands and BVI regulators.

That said, if you have not already done so, we would recommend checking in with your main legal counsel or other adviser on AIFMD to ensure that your post 22 July 2013 strategy is in place with respect to the management of Cayman or BVI alternative investment funds ("AIFs") or their marketing in the EU.

ESMA and CIMA Releases

ESMA issued a press release on 30 May 2013 (the "ESMA Release") announcing that it had completed negotiations on, and approved (on behalf of all 27 EU member states plus Croatia, Iceland, Lichtenstein and Norway) cooperation arrangements under AIFMD with the 34 securities regulators outside of the EU listed in the announcement.

A copy of the full text of the ESMA Release can be found here. A copy of the full text of the CIMA Release can be found here.

Background on AIFMD and the Cayman Islands / BVI

The AIFMD generally comes into force on 22 July 2013 (although it is worth noting that some EU member states have taken flexible interpretations on the impact of AIFMD during the one year transitional period expiring on 21 July 2014).  AIFMD will affect managers falling within the definition of an alternative investment fund manager ("AIFM") under AIFMD, which:

(a) are based in the EU and 'manage' AIFs (wherever those AIFs are situated); or 

(b) are based outside the EU but  'manage' EU AIFs; or

(c) are based outside the EU but 'market' their EU AIFs or non-EU AIFs (including Cayman Islands or BVI AIFs) to investors in the EU.

Many US-based managers of Cayman Islands and BVI AIFs currently market into the EU using the existing regimes - including national private placement rules ("NPPRs") - in place in the relevant EU countries.  In order to continue to do so after 22 July 2013 certain preconditions will need to be met. 

Aside from the need for cooperation agreements between the US Securities and Exchange Commission (the "SEC") and each of the relevant EU securities regulators, one of the main preconditions is the need for there to be a cooperation agreement in place between CIMA or the BVI Financial Services Commission (the "BVI FSC"), as applicable, and each of the relevant EU securities regulators where marketing takes place. 

EU-based AIFMs of Cayman Islands or BVI AIFs will also require a cooperation agreement between their home EU securities regulator and CIMA / the BVI FSC (as appropriate).  

CIMA and the BVI FSC have been in discussion with ESMA since early 2012 and the imminent signing of the cooperation agreements based on the approved ESMA model is the culmination of that process.  

The fact that the ESMA Release also lists the form of cooperation agreement between the SEC and the relevant EU securities regulators as approved sees another important piece in the AIFMD framework for US managers falling into place.

Maples and Calder's View

Maples and Calder has been involved in the EU, Cayman Islands and BVI consultation processes in relation to AIFMD from the outset.  The firm's Global Managing Partner, Henry Smith, has participated through direct engagement with the EU in both Strasbourg and Brussels and has been involved in CIMA's industry working group on AIFMD.  Paul Govier, Head of Investment Funds in London has participated in key AIMA committees/working groups on AIFMD and Peter Stapleton, the firm's lead partner on AIFMD in Ireland, has been involved in the work of the Irish Funds Industry Association and the Association for Financial Markets in Europe on AIFMD.  Tim Clipstone, Head of Investment Funds in the BVI, is the chairman of the BVI FSC's focus group on AIFMD.

Jon Fowler, Global Head of Investment Funds, commented that:

"This is very good news, and is the culmination of a continual engagement and consultation process between ESMA and each of CIMA and the BVI FSC.  For the majority of managers outside Europe this will be very reassuring news as the ability to access existing NPPRs for their Cayman Islands and BVI funds after July 2013 is key.  The same is true for EU managers with Cayman Islands or BVI funds."

For further information please speak with your usual Maples and Calder contact or one of the individuals listed above.

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