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Asian Region Funds passport

The working group of the Asia Region Funds Passport has come out with a set of draft rules to facilitate cross-border funds in the region.

The ARFP is a scheme that will permit cross-border funds between Singapore, Australia, Korea, New Zealand, the Philippines and Thailand. 

In April 2014, regulators had initiated the first consultation on the rules and regulations governing the ARFP, which the working group said received 28 submissions.

A majority of responses received for the first consultation showed participants were generally supportive of the initiative and of the proposed arrangements. 

But some respondents also urged the working group to consider linkages with the other mutual recognition schemes being planned in Asia-Pacific.

Moreover, a large number of firms were concerned about the implications of domestic taxation arrangements and advocated the neutral tax treatment of passported funds.

The working group has proposed rules covering areas such as the eligibility and operational criteria for passported fund managers and passported funds, as well as the authorisation process. 

Click here to see the consultation and response paper, which will be open for comments until 10 April.

Other passporting initiatives

Another scheme, The ASEAN CIS Framework, which facilitates cross-border offering of funds to retail investors in Singapore, Malaysia and Thailand, was launched in August last year.

Nikko Asset Management was an early mover. In October, the firm said regulators had approved its Singapore Dividend Equity Fund.

Earlier, Nikko had raised concerns about the implementation of the ASEAN CIS scheme, for example, tax implications as well as operational issues such as currency mismatches and different settlement times.
According to research firm Cerulli Associates, the ASEAN CIS framework will take time to gain traction as the real challenge lies in penetrating the local distribution networks,
Apart from the ARFP and ASEAN CIS passporting schemes, work is also going on between Hong Kong and China for mutual recognition of funds.
A few see the potential for the ASEAN CIS framework, the ARFP and the Hong Kong-China mutual recognition scheme to converge in the long run, presenting a threat to the regional dominance of UCITs funds.

Part of the Mark Allen Group.