Steven Chan - Promoting the Regulatory Recognition Approach to

Report
Promoting the Regulatory Recognition Approach to
Accelerate Regional Financial Integration
APFF Seattle 2014
July 7, 2014
AGENDA
Overview - Funds Passport Initiatives
Asia Region Funds Passport (ARFP)
Challenges
Recommendations
Image source: www.wikipedia.org
THREE REGIONAL FUNDS PASSPORTING INITIATIVES
Passport Initiative
Overview
Opportunities
Asian Region Funds
Passport (ARFP) – an
APEC Initiative
• Consists of Australia, New Zealand, The Philippines,
Singapore, South Korea and Thailand
• Enables fund operators in member economies to offer
eligible schemes to retail investors under a
streamlined process
• Consultation paper released for comments (due date
July 11, 2014)
• Reduce costs (more investment choices at
reasonable costs)
• Improve efficiency (increased cross
border capital flows & access to savings)
• Increase investor protection
• Grow funds expertise & jobs in the region
China-Hong Kong
Mutual Recognition
• Pilot scheme to allow mutual funds/CIS authorized in
China or Hong Kong to be sold in each other’s
jurisdiction
• Authorization not automatic; foreign fund will have to
seek approval from host regulators but under a
streamlined process
• Negotiations completed; pending approval from
China’s State Council
• Initially planned for plain vanilla type
products (excluding ETFs, hedge funds,
alternate investment funds)
• China large savings pool (estimated at
USD 7.5 T in bank accounts)*
• Trust company products and insurance
• Launched in Oct. 2013 between Malaysia, Singapore
and Thailand
• Facilitates the cross-border offering of CIS to retail
investors in the three countries
• Implementation started in early 2014
• Initially, "long-only” and retail funds,
other asset classes may be permitted at
later date
• Sizeable markets – three markets
combined had a total of more than AuM
USD250 bn (USD23bn registered
offshore funds in Singapore)*
• Region with high growth
ASEAN Collective
Investment Scheme
(CIS) Framework
*www.businessinsider.com (April 14, 2014)
*www.forbes.com (Jan. 23, 2014)
THE ARFP CONSULTATION PAPER PROPOSES:
•
Rules governing passport CIS & participating CIS operators
•
Procedures & requirements for passport CIS
•
Supervision framework for CIS
•
Enforcement mechanisms for passport arrangements
KEY ISSUES CRITICAL TO THE ARFP’S SUCCESS
Framework
Restrictive legal architecture
Membership
Narrow membership; competing regional passport initiatives
Taxation
Competing tax regimes; double taxation in cross border flows
Distribution
Lacked standards and uniformity
KEY RECOMMENDATIONS
Enlargement/
Membership
• Ensure ARFP legal architecture is compatibility with local jurisdiction laws
• Create different membership categories
• Flexibility for future consolidation of funds passport initiatives
• A clear message to industry on enlargement aspirations
Taxation
• Greater clarity and certainty
• Tax reliefs in cross border flows
• UCITS model – e.g. tax neutrality
Transparency,
Standards &
Harmonization
• Standardized formats for information
• Development of clear rules under which funds are to be passported and allowed for
distribution
• Uniform notification process and standards for participating jurisdictions
• Data confidentiality
Continued
Engagement
• Cost-benefit analysis
• APFF as a platform for continued engagement with key stakeholders
• Technical discussions at participating jurisdictions
THANK YOU

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