INTERNATIONAL: Australian Parliament Introduces Asia Region Funds Passport

Wednesday May 2 2018

It has been reported that the Corporations Amendment (Asia Region Funds Passport) Bill 2018 (Cth) was introduced to the Australian Parliament on 28 March 2018 as part of Australia’s commitment to joining the Asia Region Funds Passport (Passport). The Passport is a multilateral framework allowing eligible funds to be marketed across member countries without the need for overly onerous additional regulation.

Like Australia, Japan, Korea, New Zealand and Thailand, have also signed a Memorandum of Cooperation (MOC), which sets out the agreed rules of the Passport and commits the signatories to implement the Passport Rules into domestic law.

Collective investment schemes (and their respective sub-funds) (Schemes) which are located in a participating economy will be able to register as a Passport Fund. The jurisdiction where a Passport Fund is first registered or approved will be designated as its Home Economy and a jurisdiction in which a Passport Fund applies (or is permitted) to offer interests to investors will be the Host Economy.

Host Economies will have the ability regulate matters such as disclosure, distribution, member complaints and other investor protections. In addition, Host Economies will be able to impose additional requirements on foreign Passport Funds, so long as these are:

• not unduly onerous on the foreign Passport Fund (when compared to the equivalent requirements for Schemes in the Host Economy); and
• reasonable to protect investor confidence.

In order to offer interests to investors in Australia under the Passport, funds registered in another participating economy must:

• register as a foreign company in Australia;
• lodge a notice of intention with ASIC; and
• provide ASIC with a PDS in respect of the fund.

ASIC will generally have 15 business days to consider an application, beginning on the day after the notice is lodged with ASIC. A notice may be rejected for reasons such as:

• the fund is unlikely to comply with the home or host economy’s laws and regulations;
• the entry of that fund into Australia is not in the public interest;
• Australia has imposed sanctions against another economy and ASIC is of the view that allowing the passport fund to operate in Australia would breach those sanctions; or
• the name of the fund is unavailable.

If the notice of intention is not rejected, the fund becomes a Notified Foreign Passport Fund.

The Passport will commence when at least two of these participating economies formally confirm that implementation has completed from their side.

Industry is also calling for withholding tax reform to accompany Australia’s entry into the Passport regime in order to ensure that Australian fund managers are not put at a disadvantage to other participating economies.