After more than two years of waiting, the Apec-led ARFP to connect the fund markets of Australia, Japan, Korea, New Zealand and Thailand will be rolled out on 1 February.
Initially, participating countries were expected to launch the passporting scheme in August. The new date was set at a meeting in late-September, according to an update on the programme’s website.
The five countries entered into a Memorandum of Cooperation (MOC) in 2016, but have since been under negotiation because of taxation issues.
“The governments participating in the ARFP scheme have been playing a long game. They haven’t rushed to get the scheme launched,” Andrew Gordon, managing director for Asia at RBC Investor and Treasury Service, told FSA in a previous interview.
“I think questions remain about whether the scheme is able to deliver a level-playing field in terms of taxation. And if you look at some of the markets involved, there is already easier availability to distribute offshore funds,” he added.
However, Gordon noted that passporting or cross-border schemes take time to be successful. “It has been 30 years since Ucits [funds] were launched originally in Europe, and it is fair to say that [the structure] was not an overnight success. It took a while to build momentum.”
Progress
The ARFP participating countries are at different stages in terms of implementing the scheme.
For example, Japan, Thailand and Australia have completed preparations for implementation, which include the exporting and importing of passport funds, according to the latest update.
Meanwhile, South Korea and New Zealand are also “well advanced” in the legal and regulatory requirements needed in their respective jurisdictions.
The participating countries launched a pilot process earlier this year. The latest update noted that a number of funds in various jurisdictions have used this to obtain registration in their home country, which has helped improve the efficiency and effectiveness in dealing with these applications.
However, host-country arrangements have not yet been fully tested, the updated noted.
“Regulators may continue to deal with a fund on a pilot-like basis for the period up to and beyond 1 February [2019],” the update said. “Host-economy requirements and processes will also continue to be tested and refined over this period to ensure they are practicable.”
The update noted that applications from prospective passport funds in their home economies might be made, but funds will not be registered for sale before February. After that time, applications can be made by passport funds to host economies to allow cross-border offers.
The ARFP is considering further initiatives to extend the passport to new economies, noting continuing discussions in jurisdictions which have the potential to join as participants.
For example, India has been in discussion with the ARFP officials about joining the scheme, Remi Toucheboeuf, head of products, asset and fund services for Asia at BNP Paribas Securities Services, said last year. The addition of Indonesia or Taiwan as members of the scheme would also be a game changer, he added.
When the ARFP plans were first announced in 2013, Singapore was one of the first signatories of the Statement of Intent to establish the scheme. However, it did not choose to sign the Statement of Understanding (SoU) in 2015. The Philippines, meanwhile, was a signatory on the SoU in 2015, but did not sign the MoC in 2016.
Another Asian passporting scheme, the Asean Collective Investment Scheme (CIS), connects the fund markets of Singapore, Thailand and Malaysia. Although it was launched in 2014, only seven fund managers have joined the programme, with Schroders and UOB Asset Management being the latest to do so.
