Development of an Asia Region Funds Passport (Passport) has progressed to the next stage of implementation, with a wide-ranging consultation paper released on 16 April 2014 for public comment. Comment is sought on five key themes:

  1. eligibility;
  2. licensing;
  3. operation;
  4. dealing with investors; and
  5. regulatory supervision.

Significantly, since the Passport was initially proposed full mutual recognition of laws will now not be possible in the initial phase. Instead, it is proposed that Passport funds be regulated by a mix of local laws, foreign laws and specific Passport rules. This mixed approach aims to create a common minimum standard despite regulatory diversity in the region.


The Asia Region Funds Passport is an APEC initiative aiming to create a multinational regulatory framework to enable the cross-border marketing and regulation of collective investment schemes (CIS) in each participating jurisdiction. It is hoped the Passport will encourage regional financial integration through investors being able to access an internationally diversified range of investment products with a consistent level of investor protection.

As we have previously discussed, concerns were expressed about the diverse regulatory structures of each country and, in particular, the vastly different tax treatment of financial services and products. While these roadblocks to implementation remain, the proposal has now moved to the consultation stage.


The interaction between the laws of the “home economy” (where a fund is established), the laws of the “host economy” (where the fund is being marketed) and the specific Passport rules is complex. In short:

  • eligible CIS structures will be determined by the Passport rules;
  • licensing and operation of Passport funds will be jointly regulated by home economy laws and Passport rules; and
  • Passport fund interactions with investors will be regulated by the host economy’s laws.

Australian fund managers will find the proposed Passport rules broadly similar to existing regulatory standards. Where existing Australian regulations are more stringent than proposed Passport standards, Australian funds seeking to operate as a Passport fund will be held to the higher regulatory standard.

The table on page two expands upon the above summary of the proposed regulatory requirements.

Click here to view table.


Full implementation of the Passport will have significant implications for fund managers. Economies of scale are expected to be realised by Passport funds, especially for those offered across multiple participating countries. Increases in employment opportunities in funds management are also anticipated. More broadly, the Passport is expected to have a positive impact for the financial services industry and the broader economy in each participating jurisdiction.

Although there are opportunities, Passport funds represent a disruptive alternative to an already competitive industry. Australia has the fourth largest savings pool globally with over $2 trillion in funds under- management, making Australia a likely target for foreign domiciled funds. The increased competition from Passport funds is expected to reduce investment fees and also offer consumers greater choice of fund. Accordingly major challenges will be faced by Australian fund managers who are ill-prepared for the Passport fund’s arrival.

We urge all stakeholders to consider the Consultation Paper to assess its strategic implications for your business.


Submissions should be made to by 11 July 2014. No particular form of submission is prescribed. Following the end of the consultation period it is hoped arrangements for the Passport will be finalised by early 2015 with a view to the Passport commencing in 2016. However, whether participating countries can implement the necessary domestic arrangements for regulating Passport funds is uncertain.

The Passport presents unique strategic challenges for existing funds. Corrs has the right team to assist you should you have any questions regarding the consultation paper, the submissions process, or the Passport’s impact on your business.