1 October 2013 – The ASEAN Capital Markets Forum (“ACMF”) announced today that the Securities Commission of Malaysia, the Monetary Authority of Singapore and the Securities and Exchange Commission, Thailand have signed a Memorandum of Understanding (“MOU”) to establish the ASEAN CIS Framework for cross-border offering of collective investment schemes (“CIS”).
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.
The Framework enables fund managers operating in a member jurisdiction to offer CIS constituted and authorised in that jurisdiction (“ASEAN CIS”) to retail investors in other member jurisdictions under a streamlined authorization process. The signatories to the MOU (the “Signatories”) are targeting to implement the Framework in the first half of 2014.
The Signatories have also agreed to adopt a set of common standards to govern the cross-border offering of ASEAN CIS. The common standards are designed to ensure that the fund managers who tap on the Framework have the necessary expertise and experience, and schemes offered under the Framework are managed based on industry best practices. More details on the common standards are found in the Annex.
The adoption of the common standards by the Signatories allows fund managers to establish a suite of CIS that can potentially be offered in all three jurisdictions, which is currently not possible. In addition, the Signatories are also committed to reviewing applications made under the Framework in streamlined manner. This means that fund managers will now have a direct and efficient channel to offer their schemes in member jurisdictions.
To facilitate the smooth operation of the Framework, the Signatories will issue a handbook in due course to provide guidance to fund managers on various administrative and procedural matters including the application procedures, the use of local distributors in the offering process, and the procedures for remittance of funds.
Separately, the signatories have also agreed to an arrangement to provide mutual assistance in relation to the supervision of cross-border offering of collective investment schemes to non-retail investors.
Datuk Ranjit Ajit Singh, Chairman of the Securities Commission Malaysia, said “The ACMF has achieved another significant milestone with the signing of the MoU, which is in line with the goal of promoting greater regional cross-border flows and to build brand recognition of ASEAN as an asset class. 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.”
Mr. Lee Chuan Teck, Assistant Managing Director (Capital Markets Group), MAS, said “The ASEAN CIS framework is a testament of ACMF’s commitment to achieve the vision of ASEAN Economic Community 2015. Singapore is pleased to participate in this exciting and important initiative which will further integrate ASEAN capital markets and improve the flow of funds products amongst the participating economies.”
Mr. Vorapol Socatiyanurak, SEC Thailand’s Secretary-General, said “the ACMF has made yet another big progress today. The SEC Thailand is delighted to be able to be among the first three jurisdictions that sign this MOU. 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.”
More information on the ACMF Implementation Plan and the ASEAN Economic Community Blueprint 2015 can be found at http://www.theacmf.org/ACMF/webcontent.php?content_id=00014 and http://www.asean.org/5187-10.pdf.
ASEAN CIS FRAMEWORK
Eligibility Criteria for CIS Operators
Experience in managing CIS
· CIS operator must have a track record in managing CIS of at least 5 years.
· CIS operator, including its related companies, must have assets under management (AUM) of at least USD 500 million.
Minimum Capital Requirements
· CIS operator must maintain shareholders’ equity of at least USD 1 million, and maintain additional capital if its AUM exceeds USD 500 million.
Qualification of Personnel
· CEO must have a minimum of 10 years of experience in financial or capital markets.
· Directors must have a minimum of 5 years of experience, and in the case of an executive director, such experience must be in financial or capital markets.
· Key executive officers and fund managers must also meet minimum competency requirements and have adequate experience in financial or capital markets.
Trustee / Fund Supervisor
· The trustee / fund supervisor must be independent of the CIS operator.
· CIS operator is required to appoint an independent auditor to conduct an annual compliance audit of the CIS operator.
· ASEAN CIS is only permitted to invest in transferable securities (i.e. equities and bonds), money market instruments, deposits, other CIS, and financial derivatives.
· Permissible investments are subject to certain eligibility requirements, for example, requirements on liquidity and valuation.
· Investments in transferable securities or money market instruments issued by a single issuer must not exceed 10% of the net assets of CIS (the “Single Entity Limit”).
· The Single Entity Limit is raised to 35% in the case of government debt securities with a credit rating of at least investment grade.
· The Single Entity Limit is lowered to 5% in the case of non-investment grade, unrated, or unlisted securities. In aggregate, such investments must not exceed 15% of the net assets of CIS.
Use of financial derivatives
· Investment in financial derivative instruments is permitted provided that the global exposure to financial derivatives (computed under the commitment approach) does not exceed 20% of the net assets of CIS.
· The maximum exposure of CIS to single counterparty of an OTC financial derivative must not exceed 10% of its net assets where the counterparty has a credit rating of investment grade. The counterparty limit is lowered to 5% in any other cases.
· In addition, the CIS’ exposure to the underlying assets shall not exceed the investment limits stated above.
· The offer of ASEAN CIS in any member jurisdiction must be made in compliance with the disclosure requirements of that jurisdiction.
Marketing and Distribution
· The marketing and distribution of an ASEAN CIS in any member jurisdiction must be carried out by intermediaries that are suitably licensed in that jurisdiction.
A full set of the Standards for ASEAN CIS Framework is available at [http://www.theacmf.org/ACMF/upload/standards_of_qualifying_cis.pdf]