Australian legislators have approved moves to allow investors to tap into a new fund passporting system among certain Asian nations.

While Australian banks are wrestling with a mountain of compliance woes, there’s more positive news around reports that legislators now allow investors to put money to work via a passporting agreement among five Asian nations.

The Corporations Amendment (Asia Region Funds Passport) Bill puts into effect the Passport’s Memorandum of Cooperation signed in 2016 by Australia, Japan, Korea, New Zealand and Thailand, reports said. 

Both houses in the Australian parliament have passed the legislation. 

“The passport will support the development of the Asian funds management industry through improved market access and regulatory harmonisation,” Minister for Revenue and Financial Services Kelly Megan O'Dwyer was quoted by AsiaAsset as saying last week. 

The legislation allows Australian managed funds to become passport funds and sell their products to the other participating countries, she is reported as having said, giving the country’s investors the ability to sell their wares to Asia's expanding middle class, and to the growing numbers of high-net-worth and ultra-high net worth individuals in the region.

The passport will also allow managed fund providers from other participating economies to become passport funds and sell their products to Australia, she said. 

The initiative has echoes of Europe’s well-established UCITS funds regime, which enables funds to be bought and sold across the European Union, and in multiple share classes, without having to be registered and approved in each individual country. Even investment firms outside Europe, such as in Asia, have used these structures. The case for passporting is that it enables larger funds to exist, encourages consolidation among smaller funds, thereby capturing economies of scale. There have been a number of moves in Asia to replicate the UCITS regime (the acronym means Undertakings For The Collective Investment Of Transferable Securities). 

Australia’s banking and investments sector has been hit by a number of scandals and compliance problems in recent months. See here.