European Commission confirms that non-EU AIFs are not subject to SFTR

As reported in an earlier Newsflash, ESMA made an explicit statement in its Final Report on its Guidelines on reporting under the SFTR published on 6 January 2020 that non-EU AIFs with authorised or registered AIFMs (which, in practice, means EU AIFMs) are subject to the SFTR reporting obligation. Subsequent to that statement, AIMA had requested the European Commission for further clarification, as that ESMA explicit statement contradicted oral indications previously given by the European Commission.

The European Commission has now formally responded to AIMA in the letter below and explicitly confirmed that “Non-EU AIFs, i.e. AIFs not established in the Union, are not subject to the [reporting obligation], even if the AIFM is authorised or registered in accordance with [AIFMD].”

This is very welcome, if perhaps a bit surprising, news as it means that a large portion of the hedge fund industry is now out-of-scope from the SFTR reporting obligation. It is also worth noting that there is now a clear distinction between the application of the EMIR reporting obligation, which does apply to non-EU AIFs with EU AIFMs, and the SFTR reporting obligation, which now does not.

In addition, and clearly as a result of behind-the-scenes discussions between the European Commission and ESMA, ESMA also sent a response to AIMA (found below) in which it essentially attempts to backtrack from its explicit statement to the contrary in the Final Report.

Many thanks to AIMA, who have kindly consented to our attaching the Commission and ESMA written responses to this Newsflash.