by Greg Bright
The Australian Government has given a fillip to the long-discussed Asia Regional Funds Passport scheme with the release of draft legislation and a request for proposals to participate in a pilot program. And it’s not just fund managers who stand to benefit. Other service providers could do very well out of this.
APIR Systems, for instance, is looking to deal itself into the provision of advice and possibly the infrastructure to assist in the interconnectivity of the fund coding systems throughout the region. Each of Australia’s 30,000-odd unlisted funds (about 50 per cent of which are active) has an identification number but there is as not yet a system to ensure that the funds offered in one jurisdiction are actually the same ones offered in another. Each jurisdiction in the 23 nations which may be classified as “Asia Pacific”, has a different – or no – system.
The whole point of the ARFP scheme, from our perspective, is to assist the marketing of Australian-based funds throughout the region and the offshore regional funds to be offered in Australia and New Zealand. Australia and New Zealand see themselves as potential export nations because of the sophistication of their funds management companies as well as their big local clients.
Importantly, for the first time, the Government appears to have a schedule in mind, with the introduction of a pilot scheme. According to an Australian Government website the pilot program will:
- test home regulator and host regulator processes
- test taxation treatment of “Passport Funds” by host country taxation authorities
- identify areas of ARFP processes that may require further development of the passport rules before the ARFP goes live, and
- identify any remaining barriers in host countries.
Chris Donohoe, the chief executive of APIR, which is the established sole provider of a range of codes for investment funds and similar identifiers in Australia, says: “We can grease the wheels.”
In the APAC region, APIR has, arguably, the most sophisticated and largest identification system providing and monitoring managed funds, across multiple platforms and technologies. It not only pioneered an Australian identification system, it also negotiated deals with international organisations to represent their identification systems for Australian fund managers and big super funds.
APIR was established in 1993 and has identified about 30,000 financial products since then, 15,000-odd of which are still active. The company is still privately owned.
The company believes that there would be great value in the region developing a standard fund identifier system. It’s not just talking its own book. Each country either has its own system or subscribes to an international one, such as “ISIN”. This, which stands for ‘International Security Identification Number’, is, as it happens, is also handled by APIR in Australia, in association with the ASX.
APIR has also diversified in recent years with the provision of other identification numbers, such as ‘SPIN’ (Superannuation Product Identification Number) and ‘LEI’ (the international Legal Entity Identifier’) which came about because of Europe’s MIFID II regulation.
Donohoe says: “APIR has been monitoring the development of ARFP and welcomes the minister’s recent announcement regarding the establishment of a pilot program… It is an effective way to test the regulatory framework and to investigate operational requirements.
“APIR understands the importance of identifiers in delivering efficient and accurate information to the market and believes that the adoption of a standardised regional identification regime will enable a scalable and cost-effective system in line with the domestic and regional expectations of the ARFP.
“While each jurisdiction will have its own regulatory identification process, APIR believes that a standard regional identifier will provide regulators, industry stakeholders and consumer with product clarity. APIR is looking forward to working with the industry in progressing the ARFP.”
Donohoe says that Australia is leading the way with the Fund Passport scheme and there are various opportunities for fund managers and their service providers.
“APIR has done a lot of work in Asia over the past few years and the value we can add is in understanding the linkages between jurisdictions and systems,” he says. “For instance, the investor needs to know whether this product is exactly the same as the one being sold elsewhere.”