Global Distribution Part I:
Asia and Australia
Elizabeth Gray, Partner, Sydney
Choo Lye Tan, Partner, Hong Kong
Philip Morgan, Partner, London
8 July 2014
© Copyright 2014 by K&L Gates LLP. All rights reserved.
PRC ACCESS: Outbound ARC access
 Access to PRC investors
 QDII
 Qualified Domestic Institutional Investor
 Enables PRC domestic institutional investors with a QDII licence and
quota approved by the State Administration of Foreign Exchange
(SAFE) to invest in offshore non-PRC markets.
 QDLP
 Qualified Domestic Limited Partner
 Only available in Shanghai
 Allows qualified domestic private RMB funds, established in
Shanghai, to invest into offshore securities markets
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PRC ACCESS: Inbound PRC access
 Access to PRC investments
 QFLP/RQFLP
 Qualified Foreign Limited Partner/Renmimbi Qualified Foreign
Limited Partner
 Only available in Beijing, Tianjin and Shanghai
 Allows foreign investors to form an onshore RMB fund to invest in
private Chinese companies
 QFII/RQFII
 Qualified Foreign Institutional Investor/Renmimbi Qualified Foreign
Institutional Investor
 Most direct and fastest way of accessing CSRC-approved PRC
securities
 No requirement for a physical presence in the PRC
 Lower barriers of entry
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QFII/RQFII
 Key differences between QFII and RQFII
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Currency of settlement
Investment eligibility
Suitability considerations
Barriers of entry
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RQFII
 Enables the consideration and perhaps, creation of
new products
 Access to previously unavailable clients
 Considerations
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Choice of jurisdiction
Purpose of structure
Investment focus
Flexibility
Costs
Tax
Support
Legal issues
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RQFII cont.
 Issues
 Impact of HK-PRC mutual fund recognition/mutual stock exchange
access
 Innovative investment thesis
 Lack of Clarity in interpretation and application of the RQFII Program
Rules
 Time lag
 Time limit for investments
 Requirement for offshore RMB
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Application to be an RQFII (cont.)
 Asset management licence in one of the appointed
jurisdictions
 RQFII licence from the China Securities Regulatory
Commission
 RQFII quota from the State Administration of Foreign
Exchange
 listing approval from stock exchange OR authorisation/
registration/clearance from securities regulator as a retail
fund
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Application to be an RQFII
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Asia Funds Passport Initiatives – there are 3
 Association of South-East Asian Nations (ASEAN) Fund
Passporting
 Malaysia, Singapore and Thailand
 MOU signed at the Asean Capital Markets Forum in
October 2013
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Asia Funds Passport Initiatives – there are 3 (cont.)
 Hong Kong-China Mutual Fund Recognition Program
 Not a passport but a recognition program – no automatic
eligibility
 No rules or guidelines have been issued on this
 What has been confirmed so far
 Must be “Hong Kong-domiciled”
 set up by an SFC-licenced fund manager
 using a Hong Kong trustee (if necessary); and
 having their primary place of business in Hong Kong
 SFC-authorised
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Other Programs
 Hong Kong-Taiwan ETF mutual recognition
 Hong Kong- PRC mutual stock exchange access
 Hong Kong-Australia mutual recognition of retail funds
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Asia Funds Passport Initiatives – there are 3 (cont.)
The Asia Region Funds
Passport – what is it?
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 Issues
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Tax
Distribution
Local customs and practice
Dispute resolution regimes
 Strategic Planning
 Timing requirements
 Administration
 Combinations
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The Australian Superannuation Industry
AUM approx $1.7 trillion
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The Australian Superannuation Industry (cont.)
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The Australian Superannuation Industry (cont.)
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Australian Funds Management Industry (X-Super)
AUM approx $500 billion
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A competitive industry
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Accessing the Australian Market – legal issues
The Future?/OEIC,
VCCs/LLPs ARFP,
Senate Report into
ASIC, Financial
System Inquiry
Generally federal
laws only apply
Licensing obligations
Disclosure obligations
Compliance and operating
standards
Ongoing reporting obligations
Australian fund structures generally unit trusts only due
to tax and regulatory reasons
Foreign investment
laws not restrictive foreign investment
generally welcome
We have an open regulatory environment
(but it can be complex)
Conflicted
remuneration
banned
Superannuation
funds prudentially
and highly regulated
- impacts on
arrangements with
IMs
Our tax regime =
our biggest
problem
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Only 1
principal
regulator for
IMs - ASIC
Licensing exemption
for FCA regulated
entities who wish to
target wholesale
(institutional) clients
only – minimal
registration
requirements only
Seeking investment by Australian superannuation funds
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Important regulatory changes to watch out for
 FOFA relaxed
 Privacy reforms
 FATCA
 Senate Report into ASIC June 2014
 Financial System Inquiry
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Questions
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