The Republic of the Philippines became the latest signatory to the ASEAN collective investment scheme (CIS) Framework on May 11, 2021, moving Southeast Asian capital markets one step closer to integration and potentially increasing the investment options that fund managers in the Philippines, Malaysia, Singapore, and Thailand and other signatory countries will be able to offer to retail investors in future.
The signatory countries’ capital markets regulators—the Securities and Exchange Commission of the Philippines, the Securities Commission Malaysia, the Monetary Authority of Singapore, and the SEC of Thailand (leader of the framework’s working group)—announced the successful expansion of the CIS grouping simultaneously on May 11, 2021, after the four regulators signed a supplemental memorandum of understanding to formally admit the Philippines to the framework.
The ASEAN CIS Framework was first implemented in 2014 to streamline the process for local regulators to approve foreign CIS units in the region that are authorized in their home countries. The original signatories of the framework were Malaysia, Singapore, and Thailand. Now that the Philippines has joined the grouping, the four signatories’ capital markets regulators will continue to implement the framework’s harmonization of regulations and criteria for asset management firms, fund managers, and mutual funds that are permitted to offer units for sale across the member jurisdictions. This cooperation enabled by the framework eases the bureaucratic red tape associated with the domestic approval process and improve investment protection, thereby resulting in greater opportunities for cross-border fund distributions, product access, investment diversification, and alternatives for retail investors.
The Thai SEC has already issued regulations that enable the offering of qualifying funds through the ASEAN CIS Framework, as well as through the Asia Region Funds Passport or foreign exchange-traded funds. Funds that fall under one of these schemes must file registration statements and draft prospectuses to the SEC, along with disclosure of their financial position and performance, before they can be offered in the jurisdiction. Other than through these three schemes, foreign funds are not permitted to be offered for sale in Thailand.
This development is the latest in the Thai SEC’s efforts to harmonize the offering of funds across Asia, and is similar to a recent agreement with the Securities and Futures Commission of Hong Kong for the mutual recognition of funds between the two countries, which led to the announcement of the Hong Kong-Thailand Fund Passport earlier this year. Thailand’s local regulations pertaining to this will be promulgated soon.
The Thai SEC’s announcement of this development noted that the current signatories to the ASEAN CIS Framework are encouraging other ASEAN member countries to join the framework and leverage the collective strength of capital markets in ASEAN. The entrance of the Philippines into the framework is an excellent indicator of this regional agreement’s flexibility and potential for further adoption by the diverse ASEAN-member countries, and we expect more countries to follow suit in due course.