Asean passporting: What is it and how is it relevant to me?

With the Asean Economic Community on top of the agenda for many discussions and forums, many of you may have heard of Asean passporting and wonder what it is.

It is simply a term used to describe the Asean Collective Investment Scheme (CIS). To promote offerings of securities across Asean countries, the Asean Capital Market Forum created a framework for the CIS. The CIS works like a passport, in that securities CIS-authorised in one Asean country can be offered in other member countries without the need to apply for separate approval by local regulators.

When CIS goes full-scale, a mutual fund in any Asean country under this scheme can be also offered to investors in other Asean countries, without the need for the comprehensive requirement of filing and approval by the regulators outside the home country.

In August 2012, a set of regulations for non-retail investors was issued by Thailand’s Securities and Exchange Commission. Recently, a set of related regulations for retail investors was announced and became effective on July 1 this year, which combined the existing non-retail rules with the new ones to make cross-border rules more comprehensive and user-friendly.

There are currently two countries qualified for CIS: Singapore and Malaysia. Therefore, securities incorporated under CIS in these countries can be offered to public investors in Thailand under these new regulations, as the Kingdom has endorsed the required memorandum of understanding for streamlining the authorisation framework for cross-border public offers with those two Asean countries.

Aside from being issued in a CIS-qualified country, the issuer will need to meet both standard and specific requirements.

These include being subject to supervision of its home regulator, never having had its operations suspended or licence revoked, never having breached laws or regulations, having investment policies and asset ratios as required by local mutual funds, securities units in the home country not being subject to trading suspension, securities units being offered through locally licensed brokers, and finally, completing the verification process with the SEC. Only then will the securities be allowed to be made available to investors in Thailand.

At the moment, there is no CIS-qualified offering already approved and verified by the SEC, but there have been many inquiries and a lot of interest from fund houses in Singapore and Malaysia, and funds may be made available here soon.

In general, Asean passporting is an opportunity to broaden the horizon for Thai investors, as there can be more offerings of Asean-centric and country funds made available. But as in all investments, whether CIS or non-CIS, investors are recommended to evaluate their own risk appetite and follow the portfolio allocation approach to diversify risk with appropriate asset classes and proportions.

Stay tuned, as we will surely see more developments soon.

Vira-anong C Phutrakul is |managing director for retail banking, Citibank NA.