On 26 July 2019, the Financial Markets Authority (FMA) announced the implementation of the Asia Region Funds Passport (ARFP) by New Zealand. This arrangement is intended to allow investors and managed funds from passport countries to more easily do business in other passport countries.
A memorandum of understanding on the ARFP was signed in 2016 by New Zealand, Australia, Japan, Thailand and the Republic of Korea. Australia, Japan and Thailand have had the ARFP implemented since February 2019, while the Republic of Korea is still in the process of preparing to implement it.
The FMA’s media release can be found here and application information can be found here, while information on the ARFP more generally can be found on its website.
Who needs to read it? Why
The ARFP arrangement will be of interest to both any New Zealand funds that may wish to make an offer into another passport country and any New Zealand investors that may wish to invest in a foreign passport fund.
What does it cover?
A New Zealand passport fund looking to offer into another passport country will need to apply to the FMA for registration on the Disclose register as a passport fund. In making such an offer, they will then need to lodge a notice of intention on the Disclose register. The fund will still operate mostly under New Zealand law, but will not be subject to the disclosure requirements under the Financial Markets Conduct Act 2013 in relation to the overseas offer. There may, however, be disclosure requirements or other laws in the other passport country that apply, and in any case it will need to comply with the rules of the passport arrangement.
A foreign passport fund looking to offer into New Zealand will also need to apply to the FMA for entry. Guidance for this process has been released by the FMA, and can be found here.
Our view
The ARFP remains a significant opportunity for New Zealand funds and investors, opening up access to possible investors and investments that would otherwise be more limited. However, the number of participants at present (particularly the lack of key Asian markets like Singapore) does limit its current potential, and there remains the risk that regulators in other passport countries may impose further requirements that would erode the access that this arrangement is intended to provide. If it does operate as intended, however, then the greater ease of raising international capital to invest in New Zealand will boost our economy and diversify sources of capital.
What next
If you have any questions in relation to the ARFP regime, please contact one of our experts.
