ASEAN CIS passport could arrive sooner than expected

24 Oct, 2012

An ASEAN passport for collective investment schemes (CIS), not too dissimilar to Ucits, could come into effect sooner than most experts had predicted.

This follows an announcement by the Thai Securities and Exchange Commission (SEC) that it would allow ASEAN CISs to be offered to accredited investors. The rules enable CIS products approved by one ASEAN regulator to be offered to accredited Thai investors without SEC approval.  The SEC also said such products could eventually be offered to domestic retail investors.

Singapore’s Monetary Authority Service (MAS) made a similar announcement that CISs approved in ASEAN member jurisdictions could be offered in the city-state via a fast track process although such products would need to apply to the MAS for approval while the ASEAN jurisdiction hosting the product would have to meet certain, as yet unspecified preconditions.

These developments could be a precursor to an ASEAN passport for CIS. “Talk about an ASEAN passport all stems from the initial draft of AIFMD when non-EU managers feared they would be shut out of the EU. I believe an ASEAN passport is possible although it could be a few years before it comes into being,” commented Angelyn Lim, partner at Dechert in Hong Kong.

Nevertheless, an ASEAN passport is not without its challenges particularly given the diversity among its 10 member states. Many are at varying levels of economic and regulatory development, which could hinder progress. “Some countries within ASEAN – most notably Myanmar, Vietnam and Laos – will not participate anytime soon with the ASEAN passport. Thailand and Singapore are clearly going to be the first off the mark. However, I would expect there to be a passport system in place by 2020,” she said.

Commentators have predicted a two-tier passporting system will emerge in Asia between ASEAN and APAC, which will include Australia, New Zealand and Hong Kong. Full uniformity across the whole region is unlikely to occur for years, if not decades.

Furthermore, it is highly improbable a uniform passporting system for hedge funds will come into being anytime soon. “I believe giving hedge funds a passport would be a step too far. A lot of hedge funds can access institutional investors in individual markets without too many restrictions,” commented Lim.

Hedge funds do not have the best reputation in Asia. Some countries, most notably Malaysia, blamed managers for exacerbating the Asian financial crisis in 1998. Asian investors have been historically sceptical and conservative about alternatives, something that was subsequently reinforced by the Lehman mini bond scandal in 2008.

ASEANCISDechertEUHong KongMASSECSingaporeThailand