Thu, Nov 27, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Dechert publishes legal update for Asian hedge funds

Monday, July 08, 2013

Dechert has published an update on Asian regulatory change for hedge funds. The report included:

Hong Kong-China Mutual Funds Recognition Passport

Since a public statement by the Hong Kong Securities and Futures Commission (SFC) in January regarding the new Hong Kong-China Mutual Funds Recognition Passport scheme, there have been no additional formal announcements by either the SFC or the China Security Regulatory Commission (CSRC) on the Mainland regarding the scheme's implementation, although there has been no lack of market commentary and discussion in the industry.

Hong Kong-based asset managers, as well as asset managers based further afield, are viewing this as an opportunity for Hong Kong-domiciled and SFC authorized (likely RMB-denominated) funds to tap into the vast Mainland Chinese domestic retail investor market.

On the other side of the border, this opportunity is seen as an avenue to address Mainland domestic retail investor demand for a greater variety of permissible investment options, as well as an opportunity in the first instance for larger Mainland Chinese asset management companies to be test cases to distribute their products offshore.

China

On 15 March 2013, the CSRC released the Interim Administrative Rules for Securities Investment Fund Sales Institutions' Business Operations via Third Party e-commerce Platforms (the Interim Rules), allowing third party e-commerce platforms to provide services for fund distributors, effectively allowing more financial institutions to transact fund products. These Interim Rules have opened up the fund distribution channel that was previously limited to commercial banks, fund investment companies, securities firms and independent fund sales organizations.

Authorized fund sales institutions will now be permitted to sell their products using third party e-commerce platforms such as taobao.com or 360buy.com. Taobao Marketplace has applied to the CSRC to become one of the first Chinese online shopping websites to offer fund distribution, and it has already partnered with certain banks and insurance companies in distributing their banking or insurance-linked products.

Widening sales channels for funds will likely drive down commission fees charged by banks. For joint venture securities companies and foreign asset management companies, an alternative distribution channel should allow for greater product exposure and for global brands to stand out among domestic retail funds offered at commercial banks.

Singapore

An announcement at an industry event in March 2013 indicated that the Monetary Authority of Singapore (MAS) will conduct a review of product offerings to retail customers in the banking, insurance and capital markets industries. The review will cover three aspects:

  • significant product gaps in the market;
  • the existence of inherently unsuitable products for retail distribution; and
  • whether products are efficiently created.

The review will concentrate on costs, i.e., ensuring that fixed costs such as fund management fees are adequately disclosed and open to competition. For expenses that may vary over time, the MAS advocates clarification so that these costs can be appropriately managed. We understand the MAS will be working with the industry to review these questions, although a full consultation paper has yet to be published.

India

The Securities and Exchange Board of India (SEBI) issued a notice in March 2013 inviting applications for entities interested in becoming a self regulatory organization (SRO) of mutual fund distributors. An SRO is an association or a group of entities with authority to regulate commission-based distributors of the mutual funds. Investment advisers, those who are remunerated by fees, will not be subject to regulation under this SRO. We understand that it is proposed that registered mutual funds will be charged up to 0.3% of their assets under management to fund the operation of the SRO.

Under the norms set out in the Securities and Exchange Board of India (Self Regulatory Organizations) (Regulations) 2013, applicants must be a registered company under the Companies Act, have a minimum net worth of Rs10 million (approximately US$184,200), have directors who are professionally competent and financially sound, and neither the applicant nor its directors can be involved in legal proceedings connected to the securities market that may have an adverse impact on the interests of investors amongst other criteria.

Regional Funds Passports Asia-Pacific

Financial sector regulators and officials from thirteen Asia Pacific Economic Co-operation (APEC) economies1 participated in an Asia Region Funds Passport (ARFP) policy and technical workshop in December 2012. It was the first time that China had participated in AFRP discussions. The workshop also engaged with fund management industry representatives.

Following this meeting, APEC invited tenders to study the potential economic benefits and costs of ARFP, although the report is not expected to be finalized until 2014. According to APEC, a working group was formed from representatives of interested economies to undertake detailed technical work on the proposed regime and met in May 2013. A technical model is expected to be presented to APEC Finance Ministers for endorsement in September 2013.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - George Soros puts $500m of his money on Bill Gross, Soros, Paulson backed Hispania Activos mulls Realia takeover, Ex-Credit Suisse trader’s hedge fund sees yen shorts as crowded, Hedge hunters double default-swaps as views split, Large hedge fund positions come under pressure, Vikram Pandit's fund picks 50% stake in JM Financial's realty lending arm for $87m[more]

    George Soros puts $500m of his money on Bill Gross From WSJ.com: Before Bill Gross was fully settled in at his new firm, Janus Capital Group Inc., he received an unlikely visit from the chief investment officer of famed investor George Soros ’s firm, according to a person familiar with t

  2. Unlucky Paulson & Co. rebrands $1.6bn Recovery Fund after 13% drop[more]

    From Businessweek.com: A maturing U.S. economic recovery is prompting Paulson & Co. to change course. The $19 billion hedge fund firm, led by billionaire John Paulson, told investors on a conference call this month that the Paulson Recovery Fund will be renamed Paulson Special Situations Fund on Jan

  3. Europe - Hedge funds face exit tax as Iceland central bank discusses plan[more]

    From Bloomberg.com: Hedge funds and other creditors with claims against Iceland’s failed banks face an exit tax as the island looks for ways to unwind capital controls without hurting the economy. The government targets having a plan it can present by year-end that would map out how Iceland will sca

  4. Opalesque Exclusive: Risk management emerges as a competitive focus area for hedge funds[more]

    Bailey McCann, Opalesque New York: Risk management has always been a core component of any trading strategy, as well as a critical part of business management. However, as macreconomic weakness persists, and alpha becomes increasingly hard to generate, risk management as emerged as a more promin

  5. CTAs , event-driven strategies lead hedge funds recovery in mid-November[more]

    Komfie Manalo, Opalesque Asia: November’s performance proves to be in sharp contrast to the previous month, with equities further consolidating their upswing last week, according to the latest Lyxor Asset Management’s Weekly Brief. CTA funds als