The passport is an international agreement that facilitates the cross border offering of eligible collective investment schemes, while ensuring investor protection in participating economies.
Obstacles remain
The signing of the MoC follows more than six years of international negotiation and will come into effect on 30 June 2016.
Participating countries then have up to 18 months to implement any necessary domestic arrangements, with activation of the passport occurring as soon as any two participating economies meet all requirements.
The ARFP is a region-wide initiative led by Australia, New Zealand, the Republic of Korea, and Singapore. Ministers representing these governments signed a statement of intent in September 2013.
Singapore chose not to participate in the MoC due to concerns relating to the unequal treatment of tax. It has, however, indicated that it is open to the idea of being involved in future, reports Asian Investor.
No details were given about why the Philippines and Thailand, both of which signed a statement of understanding along with the other countries in September 2015, did not sign the MoC.
If they sign before the 30 June 2016, however, they will still be considered original participants of the ARFP.
Doubts have also been raised that the scheme would take off in Australia.
According to research firm Cerulli, significant differences in the country’s tax laws and investment culture compared to many of the other participant countries are obstacles.
Greater investment choice
“The passport will create a single market for managed funds encompassing economies across the region,” said Kelly O’Dwyer, Australia’s Assistant Treasurer and Minister for Small Business.
“The passport will better enable Australian fund managers to provide financial services to Asia’s growing middle class, boosting Australian exports, while giving consumers greater investment choices.”
Special licence
Fund managers wanting to offer new funds in New Zealand, as well as local fund managers wanting to offer funds offshore, will need to apply for a special licence, New Zealand’s Financial Markets Authority (FMA) advised.
“The conditions of the licence include that the fund manager must have significant scale, a track record of having offered the fund for at least five years, and that the offered fund includes only highly diversified, vanilla investments.
“The Financial Markets Conduct Act (FMCA) will apply to any offshore fund manager wishing to sell products to New Zealanders,” the regulator said.
