Malaysia's SC addresses Asean passport concerns

The Securities Commission has responded to suggestions it is moving too slowly in terms of implementing the Asean Collective Investment Scheme compared with other countries.
Malaysia's SC addresses Asean passport concerns

Malaysia's securities regulator has sought to clarify what it sees as a wrongful perception that it is not moving as fast as its Singapore counterpart in pushing forward the Asean Collective Investment Scheme (CIS).

The Monetary Authority of Singapore (MAS) has already approved three funds for passporting, namely the Singapore equity dividend fund of Nikko Asset Management and the Asian fixed income fund and Asian equity fund of Maybank Asset Management, as reported.

But none of these funds have been approved in Malaysia or Thailand, the other two signatories of the CIS scheme, which is the first of Asia’s three passport schemes to launch and became operational in August.

This has led to the perception that the two regulators have been cautious in approving funds. The spotlight, however, has been on Malaysia because all three funds aim to be passported in that market.

Eugene Wong, executive director for corporate finance and investments at the Securities Commission (SC), told AsianInvestor that the watchdog was as committed as the other regulators participating in the Asean CIS framework.

"Funds that want to be offered in a signatory jurisdiction will as a first step apply to their home regulator for recognition as qualifying CIS,” he said. “Once recognition is given, they can proceed to apply to the host regulator when they are ready to offer in the host market.

"We are aware that there are funds which have been recognised as qualifying CIS by their home regulator and such funds can apply to offer in Malaysia when they are ready to do so.” Wong said that SC had yet to receive any applications.

An application for recognition as a qualifying CIS was merely the first step in the offering process, Wong said. A fund then needed to satisfy local disclosure requirements in offering documents and organise a local representative and distributor, he added.

Both Maybank AM and Nikko AM have strong Malaysian connections. The former is owned by Maybank, one of Malaysia’s largest retail banks, while the latter is affiliated with Affin Hwang Asset Management, one of Malaysia’s top five fund houses in terms of asset size, with $9 billion under management.

Maybank AM said it was internally discussing the application process with its sister companies in Malaysia. Nikko AM said it was working closely with its Malaysian legal counsel on the final stages of the submission.

Under the Asean CIS framework, qualified funds are allowed to be sold directly to retail investors in Singapore, Malaysia and Thailand, bypassing the creation of feeder funds. Fund approval will be a streamlined process.

When asked how long it would take for SC to approve a CIS-qualified fund, Wong said that under the arrangement, host regulators would approve a fund from a signatory jurisdiction within the same time frame as a domestic fund is approved. For the SC, that is 21 days.

Apart from the Asean CIS agreement, Malaysia’s SC also signed in 2009 a mutual fund recognition agreement with the Hong Kong Securities and Futures Commission to promote Islamic funds.

The agreement resulted in the offering of two Malaysian-domiciled sharia-compliant funds in Hong Kong this year. Public Mutual Berhad’s Islamic fund invests in Malaysian equities while RHB Asset Management’s balanced fund invests in sharia-compliant equities and non-equity investments in Asia Pacific.

Alongside CIS, Asia’s other two fund passport initiatives, which are yet to launch, are the Hong Kong-China mutual recognition and the Asian Region Fund Passport.

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