European Union Has Postponed Key Passport Decision: Allowing Valuable “Passporting” Should Still Be The Outcome
The European Union has decided recently to postpone a key decision on the issuing of passports that directly affects the Cayman Islands.
The Securities and Markets Authority has recently made the decision to delay its commendation as to whether or not it will choose to grant a “3rd country passport” to fund managers of the Cayman Islands Alternative Investment Fund.
This passport issuance – or “passporting” – as it is commonly called, would allow fund managers based in the Cayman Islands to conduct commerce throughout the European Union member countries. To be granted a passport for this alternative investment fund, the applying nation has to display appropriate protections for the fund stakeholders and also have measures on the books that meet or exceed European Union guidelines. In lieu of having this passport – the managers of the fund have to apply for a passport in every country where they want to do business. Since Cayman is in the process of employing new regulations, the controllers handling the process cannot issue a definitive ruling. Moreover, and given the large number of investment funds in the Cayman Islands, this tiny island nation plays a big part in the overall success of the worldwide economy.
Sources close to the proceedings have stated that Cayman has been a global leader in combating money laundering and that the country’s track record in relation to these activities should be a good litmus test. This should furthermore enable the Cayman Islands fund managers to be eligible for the passporting. They also expect the European Union to continue to allow Cayman Islands-based funds to continue to be marketed across Europe in the interim. The Securities and Markets Authority has, in the past, “green lit” the granting of passports to other nations such as Japan and Canada but has deferred the decisions for managers in countries such as the United States, Singapore and Hong Kong.
Sources say that Cayman should be a couple of months away from receiving formal approval for the passporting. The wait stems from changes coming down the pipe from the Cayman Islands Monetary Authority. These changes include an important legislative amendment regarding the power to impose administrative fines for regulatory violations without having to bring these types of issues to the country’s court system.Another change causing delay is the fact that the Cayman Islands Monetary Authority is, at present, working on a better system for risk assessment and monitoring. These are the last remaining impedances and resolving them should see the passports issued in kind.
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