2: The passport will allow CIS established and regulated in one passport member economy (the home economy) to be offered to investors in other passport member economies (host economies), under a clearly defined framework which seeks to ensure that the laws and regulations of the participating economies are applied in a sound and coherent manner. By supporting regulatory consistency, it is envisaged that the passport will result in an increased number of Asia regionbased CIS offered in each member economy. There may be a number of these CIS that are offered in multiple member economies. The expected increase in CIS activity in the region is, over time, expected to have a positive impact on investors, the Asia region CIS industry, and the broader economy in each participating jurisdiction. The development of the passport arrangements outlined in this consultation paper has been guided by particular objectives in each of the impact areas. These are outlined below. Delivering the benefits of greater competition As outlined above, the passport is expected to result in greater competition in the Asia region CIS industry. One of the key objectives of the passport is to ensure investors receive the benefits of this, for example, in terms of lower fees and greater CIS choice. In the Asia region, the degree of choice by investors varies. In some economies, there is a high degree of choice; in others, choice is more limited in terms of: location of CIS operation: for example, may be only very limited penetration of foreign operated CIS in that economy; geographical of CIS: for example, a vast majority of CIS may be domestically focused; and investment type and approach: for example, there may be only a limited number of options for investors looking for index or money market funds (MMFs). By increasing the number of foreign regulated CIS being offered in member economies, the passport is expected to increase the diversity of CIS available to investors. This, in turn, will improve investors’ ability to diversify their portfolio and reduce concentration risk. Similarly, the costs faced by investors in CIS also vary across the region. Investors in the Asia region face some of the lowest and some of the highest CIS fees and expenses. An increase in the number of Asia regionbased CIS being offered in passport member economies may see some reduction in fees as a result of greater competition. For CIS offering in multiple passport member economies, larger investor bases may create economies of scale benefits that can be passed onto investors in the form of lower fees.
2: The passport will allow CIS established and regulated in one passport member economy (the home economy) to be offered to investors in other passport member economies (host economies), under a clearly defined framework which seeks to ensure that the laws and regulations of the participating economies are applied in a sound and coherent manner. By supporting regulatory consistency, it is envisaged that the passport will result in an increased number of Asia regionbased CIS offered in each member economy. There may be a number of these CIS that are offered in multiple member economies. The expected increase in CIS activity in the region is, over time, expected to have a positive impact on investors, the Asia region CIS industry, and the broader economy in each participating jurisdiction. The development of the passport arrangements outlined in this consultation paper has been guided by particular objectives in each of the impact areas. These are outlined below. Delivering the benefits of greater competition As outlined above, the passport is expected to result in greater competition in the Asia region CIS industry. One of the key objectives of the passport is to ensure investors receive the benefits of this, for example, in terms of lower fees and greater CIS choice. In the Asia region, the degree of choice by investors varies. In some economies, there is a high degree of choice; in others, choice is more limited in terms of: location of CIS operation: for example, may be only very limited penetration of foreign operated CIS in that economy; geographical of CIS: for example, a vast majority of CIS may be domestically focused; and investment type and approach: for example, there may be only a limited number of options for investors looking for index or money market funds (MMFs). By increasing the number of foreign regulated CIS being offered in member economies, the passport is expected to increase the diversity of CIS available to investors. This, in turn, will improve investors’ ability to diversify their portfolio and reduce concentration risk. Similarly, the costs faced by investors in CIS also vary across the region. Investors in the Asia region face some of the lowest and some of the highest CIS fees and expenses. An increase in the number of Asia regionbased CIS being offered in passport member economies may see some reduction in fees as a result of greater competition. For CIS offering in multiple passport member economies, larger investor bases may create economies of scale benefits that can be passed onto investors in the form of lower fees.
C2014-018_Consultation-Paper.docx