The Monetary Authority of Singapore, the Securities Commission of Malaysia, and Securities and Exchange Commission of Thailand have entered into an agreement to facilitate cross-border offering of collective investment schemes to retail investors in the three countries.
This landmark move will offer investors an easy access to a wide range of innovative cross-border funds and help mutual fund houses to enhance their business growth.
The signatories expect to implement the framework in the first half of 2014, when Singapore-based fund managers will be able to offer their retail funds directly to investors in the other two countries under a streamlined process.
Fund managers using this framework will have to abide by a set of common standards designed to ensure that the retail funds are managed based on industry best practices.
As these standards are broadly in line with Singapore’s domestic requirements governing funds offering, Singapore-based fund managers will be able to offer their existing suite of retail funds to investors in Malaysia and Thailand without having to make significant modifications to the funds, the MAS said in a statement on its web site.
Ravi Menon, managing director, MAS, said, "This framework will move us a step closer to realising the vision of an integrated capital market in ASEAN. It will significantly expand the market for Singapore-based fund managers, and give investors in ASEAN access to the wide and innovative range of funds available in Singapore."
To facilitate the cross-border offering of collective investment schemes to non-retail investors, the three countries have agreed to an arrangement to provide mutual assistance in supervising offerings of non-retail funds.
Datuk Ranjit Ajit Singh, chairman of the Securities Commission Malaysia, said, "The framework aims to create a more efficient environment to facilitate cross-border offerings of investment funds and brings us a step closer towards achieving an ASEAN passporting regime."
The ASEAN CIS Framework is one of the initiatives undertaken by the ACMF as part of the regional capital market integration plan endorsed by the ASEAN Finance Ministers in 2009.
Vorapol Socatiyanurak, SEC Thailand’s Secretary-General, said "This indicates our determination to bring efficiency to our market by enlarging investment opportunities for the investors while expanding business opportunities for the mutual fund operators.”
Licensing, registration requirements
A CIS operator that intends to offer a qualifying CIS under this framework must be licensed or registered by its home regulator, said a 43-page report on the ASEAN Capital Market Forum website.
Some major conditions are listed below:
1) The CIS operator must have a track record in managing CIS for at least five years.
2) The CIS operator, together with its related companies, must have assets under
management of at least $500m globally. The companies are said to be related where a company a) is the holding company of another company2, (b) is a subsidiary of another company3, (c) is a subsidiary of the holding company of another company.
AUM would include discretionary funds but exclude property funds or REITs
3) The trustee/fund supervisor must be domiciled and regulated in the same jurisdiction as that of the qualifying CIS it oversees.
4) The CIS operator must maintain shareholders’ equity of at least $1m. In addition to this, where the CIS operator has assets over $500m, it must maintain additional capital, equivalent to 0.1% of the assets in excess of $500m.
5) CIS operator, which participates in this framework, would have to consent that home and host regulators may share information relating to the CIS operator and the qualifying CIS with one another.
6) Where the fund management function is to be delegated, up to an aggregate of
20% of the assets of a qualifying CIS may be delegated to foreign sub-managers/ delegates that are not regulated by a signatory to the framework.
But subject to conditions that the foreign sub-managers / delegates are —
domiciled in a jurisdiction that is a signatory to IOSCO Multilateral Memorandum of Understanding appendix and acceptable to the home regulator of the qualifying CIS.
7) The assets of a qualifying CIS must be segregated from the custodian’s assets and other clients’ assets.
8) The qualifying CIS’s underlying investments may only consist of assets namely
transferable securities, money market instruments, deposits, units in other CIS, and financial derivatives.
Independence of trustee / fund supervisor
The trustee or fund supervisor must be independent from the CIS operator and will not be considered so if
- It holds directly or indirectly 10% or more of total issued shares in the CIS operator or vice versa;
- There is a common shareholder between the trustee or fund supervisor and the CIS operator, and the common shareholder holds directly or indirectly 10% or more of the total issued share capital of the trustee or fund supervisor and the CIS operator respectively; or
- The trustee or fund supervisor has one or more directors who is or are also ultimately responsible for the CIS operator.
