AsianInvestor's regulatory roundup, May 14

HK, Singapore complete Fatca talks; insider traders face Hong Kong ban; Australia eyes deregulation; EU reconfirms transaction tax; HK issues product approval guidelines; US gives green light on OTC Clear.
AsianInvestor's regulatory roundup, May 14

Hong Kong/Singapore: Fatca deal talks wrap up
Hong Kong and Singapore – Asia’s two main financial centres outside Japan – have concluded talks on intergovernmental agreements (IGAs) with the US on its Foreign Account Tax Compliance Act. The pacts would help non-US foreign financial institutions comply with the anti-tax evasion regime.

The Hong Kong government said on May 9 that it had completed “substantial discussions” with the US Internal Revenue Service (IRS). It expects to sign a model 2 IGA “later this year”, meaning Hong Kong financial institutions would need to directly report US account holders’ details to the IRS.

The Monetary Authority of Singapore said on May 6 it had concluded similar talks with the US, with the pact expected to be inked in the second half of this year.

The city-state intends to sign a model 1 IGA, which would see details of US nationals’ accounts transferred to the Inland Revenue Authority of Singapore, which would then be responsible for relaying the information to the US.

Elsewhere in Asia Pacific, Australia signed a Fatca pact with the US on April 28.

Companies showing “good faith” in complying with the regulation have been granted a transitional period lasting until 2016, as reported. Fatca’s 30% withholding penalty on the US-sourced income of non-compliant firms would otherwise have started to bite on July 1.

Hong Kong: Tiger founder, ex-trader bans sought
Bill Wang, founder of defunct hedge fund Tiger Asia Management, and former trading head Raymond Park should be banned from trading in Hong Kong for five years, Securities and Futures Commission lawyer Simon Westbrook told an inquiry into market misconduct.

Westbrook was quoted by Bloomberg as saying the “potential still exists for market misconduct”.

The hedge fund’s “systematic abuse” was an aggravating feature of the cases, the Market Misconduct Tribunal heard on May 7.

Peter Duncan, representing the executives, said the penalty would be too harsh, as Wang and Westbrook had already paid compensation.

Tiger Asia’s fund was turned into a family office and renamed Archegos Capital Management after Wang and Park were ordered by the Court of First Instance in December 2013 to pay a total of HK$45 million ($6 million) to 1,800 investors for insider trading of shares in Hong Kong-listed Bank of China and China Construction Bank between 2008 and 2009.

In December 2012, Tiger Asia reached a $60 million settlement with the US’s Securities and Exchange Commission for the same offences.

Australia: Asic seeks feedback on deregulation
The Australian Securities and Investments Commission (Asic) has invited financial institutions to suggest areas for deregulation.

One area where Asic expects to see proposed amendments is in respect of ‘market stabilisation’ activities – that is, with regard to share prices at times of new stock issuance, for example. The regulator also moots replacing the requirement for entities such as funds to lodge continuous disclosures to Asic, and instead require them to publish disclosures on their respective websites.

Published on May 7 alongside the consultation was a report that highlights deregulatory initiatives to date.

Examples include the signing of memorandums of understanding with 29 European Union securities regulators in July last year on the Alternative Investment Fund Managers Directive (AIFMD). Under the new rules, Australian fund managers can market alternative investment funds to professional investors in the EU.

Europe: EU faces down UK FTT objection
The European Union has said it is committed to implementing the controversial financial transaction tax (FTT), following the the April 30 dismissal by the EU’s Court of Justice of a UK challenge to the tax.

On May 6, following a meeting of the EU’s Council of Economic and Finance Ministers, the EU confirmed that the first round of FTT legislation would be implemented by January 1, 2016 at the latest.

The proposed rules would introduce across participating countries a harmonised minimum 0.1% tax rate for transactions of financial instruments except derivatives, for which a 0.01% rate would apply.

If applied, the tax could also affect Asian investors, says consultancy PwC. Asian fund houses buying or selling European securities or dealing with a European broker could face fees in jurisdictions where the rules are in effect.

Eleven member states have expressed interest in introducing the FTT, including Germany, France and Italy.

Hong Kong: Product approval guidelines published
Hong Kong’s Securities and Futures Commission (SFC) on May 1 introduced guidelines on the internal product approval process for providers of SFC-authorised unit trusts and mutual funds, investment-linked assurance schemes and unlisted structured investment products.

The requirements will include that fund managers need to put in place an internal product approval committee. Fund managers also need to be able to explain the profile of their target markets and how their products confer to their customers’ risk profile and expected investment return.

Hong Kong: OTC Clear gets US green light
The US’s Commodity Futures Trading Commission (CFTC) has allowed Hong Kong Exchanges & Clearing subsidiary OTC Clear to continue offering OTC derivatives clearing services to US persons.

The US derivatives regulator issued on May 9 a no-action relief for the clearing house, despite it not having yet been registered as a derivatives clearing organisation.

The relief covers the clearing of propriety trading by US clearing members involving interest rate swaps in Hong Kong dollars, renminbi, US dollars and euros, as well as non-deliverable currency forwards in RMB, new Taiwan dollars, Korean won and Indian rupee.

The relief will last until December 31 or the date when the CFTC registers OTC Clear as a derivatives clearing organisation or exempts it from registration.

Other regulation-related stories published on recently:

Further details emerge on QDII2 stocks link

China capital curbs likely to remain in 2020: Asifma

SFC bans two female ex-bankers for life

Asia can breathe easier over Fatca – or can it?

Tackle corporate culture, not rogue traders: Iguchi

Mechanics of HK, Shanghai stocks-link unveiled


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