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04 December 2012

Hedgeweek: EU and Swiss regulators to cooperate on cross-border supervision of alternative investment funds

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The European Securities and Markets Authority (ESMA) has approved the cooperation arrangements between the Swiss Financial Market Supervisory Authority and the EU securities regulators for the supervision of alternative investment funds, including hedge funds, private equity and real estate funds.

The cooperation arrangements include the exchange of information, cross-border on-site visits, and mutual assistance in the enforcement of the respective supervisory laws. This cooperation will apply to Swiss alternative investment fund managers (AIFMs) that manage or market alternative investment funds (AIFs) in the EU and to EU AIFMs that manage or market AIFs in Switzerland. The agreement also covers cooperation in the cross-border supervision of depositaries and AIFMs’ delegates. The agreement will take the form of a Memorandum of Understanding (MoU) between the EU securities supervisors and FINMA.

The key elements of the EU-Swiss cooperation agreement are:

  • EU and Swiss supervisors will be able to supervise fund managers that operate on a cross-border basis in the EU and Switzerland;
  • The cooperation between the authorities includes the exchange of information, cross-border on-site visits and assistance in the enforcement of the respective laws (i.e. the Alternative Investment Fund Managers Directive (AIFMD) and the Swiss Federal Act on Collective Investment Schemes of 23 June 2006);
  • EU authorities will be able to share relevant information received from FINMA with other EU authorities, ESMA and the European Systemic Risk Board, provided appropriate safeguards apply;
  • The existence of cooperation arrangements between the EU and non-EU authorities is a precondition of the AIFMD for allowing managers from third countries to access EU markets or perform fund management by delegation from EU managers; and
  • The EU-Swiss cooperation arrangements are applicable from 21 July 2013 and enable cross-border management and marketing to professional investors of alternative investment funds.

The content of the memorandum of understanding follows the IOSCO Principles on Cross-Border Supervisory Cooperation 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.

ESMA is currently in contact with other non-EU authorities that are members of IOSCO, and is continuing to negotiate cooperation arrangements with the relevant authorities with a view to having these in place before July 2013.  According to the AIFMD, the fund industry from a non-EU country whose securities regulator does not have such cooperation arrangements in place by July 2013 will not be permitted to offer or manage AIFs in the EU.

The MoU with FINMA is consistent with the Regulation implementing the AIFMD that the European Commission is expected to adopt shortly, and does not pre-empt the EU Parliament and Council’s right to object to the Regulation.  If the implementing Regulation was to be amended, ESMA would review this and any other MoU accordingly.

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