The consultation report describes three cross-border regulatory tools: national treatment; unilateral and mutual recognition; and passporting. Moreover, the report outlines challenges from a regulator’s and stakeholders’ perspective, and lists suggestions on IOSCO’s role regarding cross-border issues. Based on the feedback received, IOSCO’s task force on cross-border regulation is mandated to develop a cross-border regulatory toolkit, containing common terminology, of regulatory options for use by IOSCO members, and, where appropriate, to lay a foundation for the development of guidance on the coordinated use of the toolkit.
According to ALFI, two aspects are key for collective investment vehicles:
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No matter whether recognition or passporting applies, similar rules (in other words: regulatory convergence or equivalence) are at least needed in terms of transparency and investor protection, regarding both products and service providers
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A minimum of regulatory convergence or equivalence is also a key factor to ensure that all stakeholders will operate under broadly equivalent terms, hence the cost of doing business should be comparable between jurisdictions with mutual recognition
The various options should not be discussed without considering the progress and outcome of other global initiatives, namely the negotiations on a Trade in Services Agreement at the level of the World Trade Organisation, the OECD’s action plan on Base Erosion and Profit Shifting and discussions led by certain countries within the EU on implementing a tax on financial transactions.
ALFI also thinks consideration should be given to the option of interconnecting not only national but rather regional initiatives, such as the UCITS and AIFMD passport in Europe, the ASEAN framework for cross-border offering of collective investment schemes and the intended mutual fund recognition between Hong Kong and mainland Chinese fund products. This would take global fund distribution to a new level. The consequences and details of how this could work in practice would have to be analysed thoroughly by both practitioners and regulators.
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© ALFI - Association of the Luxembourg Fund Industry
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