ASEAN Collective Investment Scheme (ASEAN CIS) – regulation memo

Under the ASEAN (Association of Southeast Asian Nations) CIS framework, the units of a fund authorised in one CIS domicile (home jurisdiction) can be offered in other participating countries (host jurisdictions) upon approval by home and host regulators.

About the ASEAN CIS

What is the ASEAN CIS framework?

The ASEAN CIS framework is an initiative from the ASEAN (Association of Southeast Asian Nations) economic community which aims to establish a single market and production base with a free flow of goods, services, investments, skilled labour and a free flow of capital.

Under the ASEAN CIS framework, the units of a fund authorised in one CIS domicile (home jurisdiction) can be offered in other participating countries (host jurisdictions) upon approval by home and host regulators.

Participating regulatory bodies and guidelines of the ASEAN CIS framework

The participating regulatory bodies of the ASEAN CIS framework are:

• the Monetary Authority of Singapore (MAS),
• the Securities Commission of Malaysia,
• and the Securities and Exchange Commission of Thailand.

Guidelines for participation to the ASEAN CIS framework are detailed in two key documents:

• The Standards of qualifying CIS,
• and the Handbook for CIS operators of ASEAN CISs.

ASEAN CIS – Key requirements for related parties

• An ASEAN CIS operator must have at least:
  • Five years of experience in managing collective investment schemes,
  • USD 350 million of assets under management globally,
  • shareholder equity of USD 1 million,
  • and maintain specified capital adequacy.
• An ASEAN CIS operator must also undertake to submit to the non-exclusive jurisdiction of the host jurisdiction’s courts.
• The trustee and fund supervisor must be domiciled and regulated in the same jurisdiction as the ASEAN CIS operator.
• Local distributors must be regulated or licensed by the host regulator.
• An independent party is required for valuation and NAV calculation.

ASEAN CIS – Key fund requirements

• Funds must be assessed as suitable for cross-border distribution by the home regulator
• Funds can only invest in specific assets classes: transferable securities, money market instruments, deposits, units of other CISs and financial derivatives
• Up to 100% of a fund’s assets may be delegated to a sub-investment manager not regulated by any of the participating countries, conditional on the home regulator’s approval
• Additional rules apply for money market funds, master feeder funds, funds of funds and exchange-traded funds

Scope of the ASEAN CIS framework

Asset managers with authorised CIS funds in Singapore, Malaysia and Thailand who wish to raise assets from retail investors within the three participating markets.

Industry implications of the ASEAN CIS framework

The ASEAN CIS framework aims to foster cross-border fund distribution and shorten time to market for funds. Local investors will benefit from a wider choice of funds as product expertise is exported to different markets.

This is an opportunity to consolidate management of funds and streamline operating models. In the future, the ASEAN CIS framework may merge with other Asian cross-border fund schemes, like the Asia Region Funds Passport.

• Distribution challenges for asset managers
  • Currency restrictions in Malaysia and Thailand: onshore
  • Responsibility of the CIS operator to appoint suitable representative offices and registrars/transfer agents in host jurisdictions
  • Taxation: country specific withholding tax rules, taxation on residents and non-residents, etc.
• Compliance and regulatory challenges
  • Country-specific requirements such as specific currencies for fund offerings, languages for offering documents, timeframes for the application process, etc.
  • Multiple monitoring and reporting procedures in order to be compliant across home and host jurisdictions

Securities Services’ view

The ASEAN CIS scheme complements the UCITS scheme, allowing asset managers to access traditionally closed fund markets such as Malaysia and Thailand. However, it is imperative that the participating regulators continue to harmonise regulations between the various jurisdictions to reduce the barriers to entry to the ASEAN CIS framework.

We provide end-to-end solutions (global custody, fund accounting, trustee services, transfer agency, middle office outsourcing, forex solutions and share class hedging) for all types of Singaporean funds eligible under the ASEAN CIS framework.

We support cross-border distribution in Malaysia and Thailand as well as in Singapore, through our transfer agency’s connectivity with local distributors. Our expertise in cross-border distribution extends to Europe, where we have a proven track record.

We have developed innovative solutions to service RQFII funds and Sharia-compliant funds that we have identified as potentially benefiting from strong cross-border inflows as part of the ASEAN CIS framework

Key dates of the ASEAN CIS framework

2008 – Implementation plan developed to facilitate cross-border offers of CIS

2013 – Founding countries signed a memorandum of understanding to establish a cross-border offerings framework for ASEAN CIS

August 2014 – ASEAN CIS framework officially launched

February 2018 – Asean CIS Framework revised including relaxed qualification for fund managers