The five countries entered into a Memorandum of Cooperation (MoC) in 2016, but have since been under negotiation because of taxation issues.
The latest update of the scheme comes right after the ARFP’s joint committee held a meeting late last month to discuss the progress of each country toward full implementation of the scheme.
“The participating economies have progressed with legal and regulatory requirements in their respective jurisdictions,” the ARFP website said. For example, Japan and Thailand have completed their preparation, while in Australia, legislation is before parliament.
Potential new joiners in the cross-border fund passporting scheme could include India, Indonesia, the Philippines, Singapore and Vietnam
In Korea, there has been consultation on the required legislation, which is expected to be put before the country’s National Assembly by June. In New Zealand, the passport rules are in the course of being incorporated into legislation.
“As legislation has been drafted and administrative arrangements put in place, some additional clarity can now be provided about the laws that will apply in each economy to incoming passport funds. The [joint committee] has been revising the published guidance and will publish an updated version in coming months.”
The joint committee first released a draft guidance paper in July last year centering on the laws and regulations that are expected to apply to imported funds in host economies.
The guidance sets out a number of key regulatory matters applicable to asset management firms aiming to join the ARFP. Matters covered include disclosure, capital controls, distribution, local agents, access to financial markets to sell ETFs and privacy and anti-money laundering legislation.
The latest update also revealed that a piloting process is underway to test arrangements, which include considering applications and getting legal and tax advice. A number of fund managers and service providers, together with regulators, are participating in the pilot.
The pilot process is expected to run until July 2018. Once the joint committee has considered the results of the pilot, it will make a separate announcement about the formal commencement of the ARFP.
Additionally, the joint committee said that it is considering extending the passporting scheme to other markets.
Without revealing any details, the committee noted that it has been in continued discussions with a number of economies that have the potential to join as participants.
“APEC is continuously promoting the ARFP scheme to other member countries for consideration,” BNP Paribas Securities Services said in a regulatory memo published in February. “Potential new joiners could include India, Indonesia, the Philippines, Singapore and Vietnam,” it said.
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 BNPPSS, 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 on the establishment of the scheme. However, it did not choose to sign on the Statement of Understanding (SoU) on the deal in 2015.
The Philippines was a signatory on the SoU in 2015, but did not sign the MoC in 2016.
The latest update noted that the joint committee meeting was also attended by representatives from the Monetary Authority of Singapore, Hong Kong’s Securities and Futures Commission and the Philippines’ Securities and Exchange Commission, who all attended the meeting as observers.
Another passporting scheme, the Asean Collective Investment Scheme (CIS), connects the markets of Malaysia, Singapore and Thailand. However, the programme has not gained much traction, with only six funds having been approved for sale by both home and host countries.
The regulators of the Asean CIS in February signed a memorandum of understanding to relax rules in a move to attract more managers to join the scheme.