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Asia comes up with ucits like regime

Singapore, Australia, Korea, New Zealand, the Philippines and Thailand have begun a joint consultation on the rules and regulations for operating the Asia Region Funds Passport (ARFP), a framework which will look similar to recent UCITS legislation in Europe.

The consultation is open for comments until 11 July and follows the signing of a statement of intent in September 2013 by Australia, Korea, New Zealand and Singapore, all of which are Asia Pacific Economic Cooperation Countries (APEC).

The ARFP will allow fund managers operating in a passport member economy to offer their funds in other passport member economies under a streamlined authorisation process, as per a statement on the Monetary Authority of Singapore’s website.

On completion of the consultation, countries which decide to be passport member economies will work to finalise the arrangements by early 2015, with a view to starting the programme in 2016.

Passporting objectives

The passporting framework has been developed in order to provide investors with a more diverse range of investment opportunities and lower fees. It is also aimed at deepening the region’s capital markets and strengthening the competitiveness of financial markets in the region and fund management industry.

Since 2010, a number of APEC economies (including Australia, Chinese Taipei, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam) have been meeting twice yearly to explore options to progress the concept of a passport.

In the report, APEC said it hopes the passport regime will also put the region’s asset management industry on a “competitive footing, by creating a strong brand for Asia region-based collective investment schemes (CIS), assisting the industry to market itself within the region, and potentially on a global basis”.

Key operational details

The report says only CIS which are constituted or established, and authorised in a passport member economy and the operator is authorised and has a principal place of business in that same economy, will be allowed to be offered as a passport.

To qualify for the passporting framework, the “operator”, or asset manager, must have at least five years experience as the operator of a CIS or other another investment scheme which invests in transferable securities and which has been sold into the retail market.

Noting that across the Asia region, there are a variety of legal structures used by CIS, unit trusts and company structures being the two most common, APEC has decided to not restrict the legal structure of the passport fund.

Passport funds will be allowed to hold assets including CIS, deposits, currency, derivatives, transferable securities, money market instruments and depository receipts over gold, although these will be subject to some investment restrictions detailed in the report.

The draft rules stipulate the home regulator would principally be responsible for assessing and monitoring compliance with the home economy laws and regulations and passport rules, while the host regulator will be responsible for the same in the host financial laws and regulations. 

Each economy will ensure the application of its home financial laws and regulations to passport funds is not inconsistent with the passport rules.

Each economy will nominate types of CIS that are authorised and could be offered to the public in its economy, while passport members will agree on the types of CIS that can be offered under the regime.

Click here to download a copy of the full consultation

A similar kind of cross-border fund sales arrangement is also on the cards in Singapore, Malaysia and Thailand.

Part of the Mark Allen Group.