In line with the implementation of the Asia Region Funds Passport initiative, which enables to cross sell funds throughout five Asian countries, including South Korea, Japan, Australia, New Zealand and Thailand, South Korea will revise related laws for the first time in two years after the government signed a memorandum of understanding (MOU) In 2016. The Financial Services Commission (FSC) is planning to legislate for the scheme by early March and implement it as early as by the end of this year.
According to the financial industry on Jan. 31, the FSC recently announced to legislate for some amendments of the Capital Markets and Financial Investment Services Act. The Asia Region Funds Passport was first recommended by Australia in September 2010 and five countries signed the MOU for the initiative in April 2016.
According to the revised bill, asset management companies can register funds to sell in the member states at the FSC. When the firms register cross-selling funds, they will be able to register and sell funds with a more simplified process in the member states, like Japan.
Asset management firms can also sell overseas funds that are raised and established in other countries in South Korea according to separate pre-requisite qualifications for foreign collective investors and foreign collective investment securities sellers.
The FSC is planning to complete the pre-announcement of legislation by March 5 and submit the bill as early as by the end of the first half of this year after the examination by the Regulatory Reform Committee and the Ministry of Government Legislation. The FSC said, “We are adjusting the schedule to implement the passport as soon as possible. Currently, asset management companies need to be screened every requirement for fund registration separately in countries in where they seek to sell funds. However, they will be able to save costs and time to enter the global market when they register their funds in one of the member states through the passport as some requirements will be exempted in the member states.
With such move, five countries will also run pilot programs. Currently, the Asia Region Funds Passport team at the Asia-Pacific Economic Cooperation (APEC) receives applications for pilot programs from asset management companies in the member states. The program participants will test various regulations, including tax system, and passport fund registration process and grasp problems remained before implementing the passport initiative in five countries in the future.
However, the scheme will be able to take effect at the end of this year as other member states are behind schedule in implementation. Considering the nature of the cross-selling system, a country cannot sell products even when it starts implementing the system first unless other countries don’t implement it.