Part 1
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Commonwealth legislation
The Corporations (Passport) Rules 2018 establishes a regional "passport" for managed funds, letting eligible schemes approved in one participating economy (Australia, Japan, Korea, New Zealand, Singapore, Thailand) be offered across others without separate approvals.
It imposes strict operator, investment, risk‑limit, custody and reporting standards and requires independent oversight and timely investor protections — reducing regulatory duplication while keeping high governance, transparency and investor safeguards.
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Direct links to the current provisions in Corporations (Passport) Rules 2018.
This instrument is the Corporations (Passport) Rules 2018.
This instrument is made under subsection 1211(1) of the Corporations Act 2001.
(1) The Dictionary at the end of these rules defines certain words and expressions, and includes references to words and expressions that are defined elsewhere in these rules. (2) A definition in the Dictionary applies to each use of the word or expression in these rules unless the contrary intention appears. (3) A number of a unit of time refers to calendar days, to be counted so as to exclude the day from which the start of the count is stated to occur and include the day on which the end of the count is stated to occur.
Note: For example, if a time limit is stated to be 7 days and the start of the count is on Monday, 10 May, the time limit is up at the end of Monday, 17 May.
(1) The operator of a passport fund must ensure that the passport fund has a compliant constituent document at all times. (2) For these rules, the constituent document of a regulated CIS is the document shown in the following table:
| Item | Home economy for the passport fund | Constituent document |
|---|---|---|
| 1 | Australia | The constitution of the registered scheme or CCIV required by the Corporations Act 2001. |
| 2 | Japan | The basic terms conditions of the investment trust (if it is an investment trust) or the certificate of incorporation (if it is an investment company) under the Act on Investment Trusts and Investment Corporations. |
| 3 | Korea | Constitutional documents of collective investment vehicles as required by the Financial Investment Services and Capital Markets Act of Korea. |
| 4 | New Zealand | The governing document for the managed investment scheme required by the Financial Markets Conduct Act 2013 of New Zealand. |
| 5 | Singapore | The trust deed or any other document of incorporation required in respect of the collective investment scheme to be authorised under the Securities and Futures Act of Singapore. |
| 6 | Thailand | In the case of a scheme established as a mutual fund, the commitment between the unit holders and the securities company required under the Securities and Exchange Act B.E. 2535 (1992). In the case of a scheme established as a trust, the trust deed as required by the Trust for Transactions in Capital Market Act B.E. 2550 (2007). |
(3) For this section, the constituent document is compliant if the constituent document includes provisions that: (a) have the effect that: (i) each member of the passport fund is entitled to seek remedy against the fund, if it is a legal entity, and its operator, in the member’s choice of the home economy or a host economy for the fund, including through compensation, in relation to loss suffered by the member due to a breach by the fund or its operator of the laws of the home economy for the fund or of the Passport Rules for the home economy or any host economy for the fund, unless: (A) the member and the fund or operator have agreed in writing that the member is not entitled to seek remedy in that place in relation to the particular proceedings; and (B) the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred; or (ii) a specified person, on behalf of any member of a passport fund when it is in the best interests of members, is entitled to seek remedy against the fund, if it is a legal entity, or its operator in the specified person’s choice of the home economy or a host economy for the fund, including through compensation, in relation to loss suffered by the member due to a breach by the fund or its operator of the laws of the home economy for the fund or of the Passport Rules for the home economy or any host economy for the fund, unless: (A) the specified person and the fund or operator have agreed in writing that the member is not entitled to seek remedy in that place in relation to the particular proceedings; and (B) the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred; and (b) have the effect that the passport fund, if it is a legal entity, and its operator agree that where a member of the fund has commenced proceedings against the fund or its operator in a court in the member’s economy, that court will be a convenient forum to hear the proceedings, unless: (i) a similar action has been commenced against the fund or its operator in another economy and it would be reasonable for the member to participate in that action; or (ii) the member and the fund or operator have agreed in writing that the court will not be a convenient forum in relation to that particular proceeding and the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred; and (c) have the effect that the passport fund, if it is a legal entity, and its operator agree that the convenient forum for the fund or its operator bringing an action against a member will be the member’s economy unless the member and the fund or operator have agreed in writing that the court will not be a convenient forum in relation to the particular proceedings and the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred. (4) For this section, the member’s economy in relation to the passport fund is: (a) the economy in which the member was located when they applied to be accepted as a member of a passport fund if that economy is a participating economy; or (b) in all other cases, the home economy for the fund.
Unless these rules provide otherwise, the operator is responsible for compliance with a provision that is expressed to impose obligations on a passport fund.
(1) The operator of a passport fund must ensure that at all times it has officers with the relevant qualifications. (2) For this section, the operator has officers with the relevant qualifications only if it has the following officers or employees with the qualifications or experience indicated: (a) a chief executive officer (or the equivalent) with at least 10 years’ relevant experience within the previous 15 years as an officer or employee in an IOSCO financial services related business, with 5 of the 10 years in a managerial or supervisory role; (b) at least 2 executive directors (or the equivalent), which may include the chief executive officer, each with at least 5 years’ relevant experience within the previous 7 years as an officer or employee in a managerial or supervisory role in an IOSCO financial services related business; (c) one or more officers or employees, who are when considered together responsible, whether jointly with others or not, for making or supervising all the discretionary investment decisions of the passport fund, each with either: (i) a bachelor degree, or equivalent, or higher qualification in a relevant discipline, together with at least 3 years’ experience within the previous 5 years as an officer or employee with responsibility for making or supervising discretionary investment decisions in an IOSCO financial services related business; or (ii) at least 5 years’ experience within the previous 7 years as an officer or employee with responsibility for making or supervising discretionary investment decisions in an IOSCO financial services related business. (3) For this section and section 9, a reference to supervising discretionary investment decisions includes monitoring and evaluating on behalf of an entity the performance of another entity that makes discretionary investment decisions as a delegate of the first entity, and being significantly involved in decisions about whether the second entity should remain as a delegate in light of its performance.
(1) The operator of a passport fund must at all times meet the financial resources test. (2) For this section, the operator meets the financial resources test if its equity (converted at the relevant exchange rate, where not denominated in USD) is greater than USD 1,000,000 plus additional capital amount. (3) In calculating the operator’s equity: (a) a guarantee or undertaking held by the operator may be counted as if it were an asset if, and only if, it: (i) is unconditional; and (ii) does not give rise to any liability for the operator; and (iii) is payable on demand; and (iv) is provided by a body that is subject to prudential supervision by a financial supervisory authority in the place of its incorporation which is, in the written opinion of the home regulator for the passport fund, generally largely compliant with the guidelines of the Basel Committee on Banking Supervision; and (b) the maximum amount of cover from time to time provided under an approved personal indemnity insurance policy may be counted but only up to 80% of the additional capital amount. (4) For this section:
additional capital amount means 0.001 × (total assets under management in USD converted at the relevant exchange rate minus USD 500,000,000) and is capped at USD 20,000,000 converted at the relevant exchange rate where the operator’s equity is not denominated in USD.
approved personal indemnity insurance policy means a professional indemnity insurance policy that has been approved for this section by the home regulator for the passport fund.
equity of the operator means the net equity being assets less liabilities after taking into account losses and includes any net assets reflected in adjustments for valuation or translation, as it would appear on a balance sheet prepared in accordance with the relevant accounting standards.
relevant accounting standards, for a home economy listed in the following table, has the meaning given in the following table:
| Item | Home economy for the passport fund | Relevant accounting standard |
|---|---|---|
| 1 | Australia | The accounting standards made by the Australian Accounting Standards Board under section 334 of the Corporations Act 2001. |
| 2 | Japan | The accounting standards under the Financial Instruments and Exchange Act and other relevant regulations. |
| 3 | Korea | General accounting principles of financial investment under Article 32 of The Financial Investment Services and Capital Market Act of Korea, and standards for accounting under Article 13 of the Act on External Audit of Stock Companies. |
| 4 | New Zealand | The accounting standards issued by the External Reporting Board under Part 2 of the Financial Reporting Act 2013. |
| 5 | Singapore | The accounting standards made by the Accounting Standards Council under the Accounting Standards Act (Cap. 2B) and the Recommended Accounting Practices (or its equivalent) issued by the Council of the Institute of Singapore Chartered Accountants (or its successors). |
| 6 | Thailand | The Accounting Guideline for Investment Management business issued by the Association of Investment Management Companies and approved by the Securities and Exchange Commission. |
relevant exchange rate means the average of the rates of currency exchange on the first business day in the capital city of the home economy for the passport fund for the year in which the calculation is made, and the first business day in the capital city of the home economy for the passport fund in each of the preceding 4 years.
total assets under management, in relation to an operator, means the sum of the value of:
(a) the assets of each CIS for the operations of which it is responsible; and
(b) any other assets for which it performs discretionary investment management on behalf of another person, whether or not on a collective basis;
as those assets would appear on a balance sheet prepared in accordance with the relevant accounting standards for the operator if they were assets of the operator.
(1) The operator of a passport fund must at all times meet the organisational arrangements test. (2) For this section, the operator of the passport fund meets the organisational arrangements test if it has: (a) a well‑documented organisational structure that clearly assigns responsibilities and specifies reporting lines; and (b) adequate internal control mechanisms including procedures and systems that ensure that: (i) assets are managed in accordance with the current constituent documents and disclosure documents of the passport fund as well as the laws of the home economy for the fund and the Passport Rules for the home economy and each host economy for the fund; and (ii) records are kept to sufficiently explain the transactions of the passport fund, and all transactions in the interests of the fund; and (iii) registers of members are duly kept except for any part of the register of members that is kept by a person identified in registers of the operator as the person keeping a register in respect of particular interests identified in registers of the operator where the keeping of that part of the register by the person is regulated or acceptable under the laws of the home economy for the fund and, for interests held by a member who acquired them in a host economy for the fund, the person keeping the register is regulated by or acceptable to the host regulator; and (c) an adequate risk monitoring and management process including a risk management framework for the passport fund assets, based on the size, complexity and risk of the assets; and (d) a compliance framework that ensures ongoing compliance with relevant laws and regulations; and (e) adequate procedures to manage conflicts of interest.
(1) The operator of a passport fund must at all times meet the track record test. Track record—experience of the operator (2) For this section, the operator meets the track record test if the home regulator for the passport fund is satisfied that: (a) for the past 5 years the operator has been responsible for the operation of financial asset CIS that have been regulated in a way that enables interests in the CIS to be offered to the general public in: (i) a participating economy; or (ii) an economy that has a regulatory framework applying to financial asset CIS that is broadly similar in effectiveness to that of the home economy for the fund in the opinion of the home regulator for the fund, having regard where relevant to the IOSCO principles and IOSCO assessment methodology relating to CIS; and (b) if the operator has undergone a relevant change of control in the past 5 years: (i) there has been substantial continuity among the officers and employees of the operator responsible for making or supervising discretionary investment decisions for financial asset CIS; and (ii) the operator has made decisions in relation to the operation of financial asset CIS without substantial influence by any person who controls the operator unless in exceptional circumstances. Track record—experience of a related party of the operator (3) For this section, an operator is also taken to meet the track record test if the home regulator for the passport fund is satisfied that: (a) the operator is able to rely on the experience and expertise of a related party in the operation of financial asset CIS having regard to the degree of commonality between the operator and the related party concerning: (i) decision‑making processes; and (ii) business processes; and (iii) staff; and (b) the related party meets the track record test in accordance with subsection (2). (4) For this section, an operator undergoes a relevant change of control if during the past 5 years: (a) another entity has commenced to control the operator; or (b) another entity has ceased to control the operator.
Note: The reference to supervising discretionary investment decisions in this section is defined in subsection 6(3).
(1) The operator of a passport fund must at all times meet the good standing test. (2) For this section, the operator meets the good standing test if: (a) the home regulator for the passport fund has not notified the operator that it is of the opinion that there is reason to believe that there is a material risk that a relevant party does not have the integrity or competence required to operate or be involved in the operation of a passport fund honestly and competently, and to act in good faith in the interests of the members of the passport fund; or (b) where a notification has been issued to the operator, the home regulator for the passport fund has revoked the notification or, if more than one, all of them in writing. (3) For this section, relevant party means any of the following: (a) the operator; (b) an officer of the operator; (c) an entity that controls the operator; (d) to the extent that the home regulator for the passport fund considers relevant, an officer of an entity that controls the operator. (4) In assessing the matters mentioned in subsection (2), the home regulator for the passport fund may take into account any relevant information including: (a) any relevant finding about a relevant party made by a regulatory body or dispute resolution service; and (b) any relevant enforcement action taken by a regulatory body against a relevant party; and (c) any relevant judgement or decision in relation to a relevant party given by a court, tribunal, arbitrator, dispute resolution service or equivalent person or body; and (d) any relevant settlement reached by a relevant party with a regulatory body, or in relation to an action or proposed action before a court, tribunal, arbitrator, dispute resolution service or equivalent person or body; and (e) any relevant enforceable undertaking or equivalent given by a relevant party to a regulatory body, court, tribunal, arbitrator, dispute resolution service or equivalent person or body.
(1) Subject to any limitations in the laws of the home economy for a passport fund, a function of the operator of the passport fund may be delegated by the operator or further sub‑delegated only if the operator: (a) remains responsible to members of the passport fund for the delegated function; and (b) has in place suitable processes to ensure that the delegate or sub‑delegate employs an appropriate standard of care when performing the delegated function; and (c) has in place suitable processes to: (i) ensure that the activities of the delegate and any sub‑delegate in relation to the delegated function are duly monitored and controlled; and (ii) evaluate the performance of the delegate and any sub‑delegate in relation to the delegated function; and (d) has in place suitable processes to ensure that the home regulator for the passport fund is at all times able to access information about the delegated or sub‑delegated functions from the operator, directly from a delegate or from any person that was a delegate for a reasonable time after they have ceased to be a delegate; and (e) has in place suitable processes to ensure that the performance of the function by the delegate and any sub‑delegate can be effectively monitored and reviewed to ensure compliance with these rules as if done by the operator. Limitation on delegation of investment management function (2) The operator must ensure that the function of making investment decisions (the investment management function) for the passport fund may only be delegated or sub‑delegated to an entity (a qualifying delegate) that is licensed, authorised or otherwise regulated to carry out or make investment decisions by a regulator that is a signatory to Appendix A of the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information. (3) The investment management business of every qualifying delegate must be regulated in a participating economy or in an economy that has a regulatory framework applying to investment management functions for financial asset CISs that may be offered to the general public in that economy that is broadly similar in effectiveness to that of the home economy for the fund in the opinion of the home regulator for the fund. This subsection does not apply to one or more delegations which together do not account for more than 20% of the value of the passport fund’s assets. (4) If the operator of a passport fund delegates the investment management function, the operator must have in place suitable processes to ensure that at all times each of the qualifying delegates has one or more officers or employees who when considered together are responsible, whether jointly with others or not, in making or supervising all the investment decisions of the passport fund, each with at least either: (a) a bachelor degree, or equivalent, or higher qualification in a relevant discipline, together with at least 3 years’ experience within the previous 5 years as an officer or employee of an IOSCO financial services related business with responsibility or joint responsibility, for making or supervising discretionary investment decisions; or (b) at least 5 years’ experience within the previous 7 years as an officer or employee of an IOSCO financial services related business with responsibility or joint responsibility, for making or supervising discretionary investment decisions. (5) For this section, a reference to supervising discretionary investment decisions includes monitoring and evaluating on behalf of an entity, the performance of another entity that makes discretionary investment decisions as a delegate of the first entity, and being significantly involved in decisions about whether the second entity should remain as a delegate in light of its performance.
Reporting breaches and changes to home regulator (1) The operator of a passport fund must notify the home regulator for the fund in writing within 7 days after it becomes aware that, without there being a breach of the Passport Rules for the home economy or any host economy for the fund, a limit set in the following rules has been exceeded for a period of 7 days without being remedied: (a) the rules in Division 6.3 (portfolio allocation); (b) the rules in Division 6.4 (limits on exposure).
Note: Under subregulation 1.0.03A(2) of the Corporations Regulations 2001, documents that must be lodged with ASIC under the Passport Rules for this jurisdiction must be lodged in the prescribed form.
(2) The operator of a passport fund must notify the home regulator for the fund in writing as soon as practicable and in any event within 7 days after it becomes aware that a breach of the Passport Rules for the home economy or any host economy for the fund has occurred, or will occur in relation to the fund, and that breach: (a) might reasonably be regarded as significant including having regard to any other breaches; or (b) when considered on its own or together with any related breach, adversely affects the value of the assets of the fund by more than 1%. Reporting breaches to host regulator (3) Subsection (4) applies to the operator of a passport fund where the laws of a particular host economy for the fund (the relevant host economy) apply to the fund. (4) The operator of a passport fund must notify the home regulator for the fund and the relevant host regulator as soon as practicable and in any event within 7 days after it becomes aware of a breach of the laws of the relevant host economy in relation to the fund, and that breach: (a) might reasonably be regarded as significant including having regard to any other breaches; or (b) when considered on its own or together with any related breach, adversely affects as much of the value of the assets of the fund as is attributable to members of the fund in the relevant host economy by more than 1%. Reporting other changes (5) If an event listed in the table in subsection (6) occurs, the event must be notified to the home regulator, and each host regulator, for the passport fund by the entity listed in the table as soon as practicable and in any case not later than 7 days after it became aware of the event having occurred. (6) In the following table, an associate means a related party except for a person or entity under paragraphs 57(5)(g) to 57(5)(i) in relation to the definition for a related party.
| Item | Event | Entity who must notify of the event |
|---|---|---|
| 1 | Interests in a passport fund are permitted to be lawfully offered as a passport fund in a host economy. | The operator of the passport fund |
| 2 | The operator of a passport fund has first disclosed to any person, other than an associate of the passport fund or its operator, or by way of a lawful disclosure on a confidential basis in relation to incomplete negotiations relating to a transaction, that it intends to propose a change in the operator. | The operator of the passport fund |
| 3 | The operator of a passport fund is changed in accordance with the laws of the home economy for the fund. | The operator of the passport fund |
| 4 | The operator of a passport fund has first disclosed to any person, other than an associate of the passport fund or its operator, or by way of a lawful disclosure on a confidential basis in relation to incomplete negotiations relating to a transaction, that it intends to propose the passport fund be wound up. | The operator of the passport fund |
| 5 | A passport fund commences being wound up in accordance with the laws of the home economy for the fund. | The operator of the passport fund |
| 6 | A passport fund completes being wound up in accordance with the laws of the home economy for the fund. | The operator of the passport fund |
| 7 | The operator of a passport fund has first disclosed to any person, other than an associate of the passport fund or its operator, that it intends to apply for the deregistration of the passport fund as a passport fund, or as a regulated CIS. | The operator of the passport fund |
| 8 | The operator of a passport fund applies for the deregistration of the passport fund as a passport fund, or as a regulated CIS if the intention to apply has not been notified. | The operator of the passport fund |
| 9 | A regulated CIS or a sub‑fund of a regulated CIS is deregistered as a passport fund. | The operator of the regulated CIS |
| 10 | A regulated CIS that has been deregistered as a passport fund and will no longer be required to be operated in compliance with these rules. | The operator of the regulated CIS |
| 11 | Redemption of interests in a passport fund in accordance with these rules is suspended or ceases to be suspended. | The operator of the passport fund |
(7) Despite subsection (5), the operator of an Australian passport fund is not required to give notice of an event mentioned in item 9 of the table in subsection (6) to each host regulator for the fund.
Note: ASIC is required to give such a notice under subsection 601PBD(3) or 1216D(4) of the Corporations Act 2001.
Legal responsibility for holding passport fund assets (1) For this section, the responsible holding party of the assets of a passport fund under the laws of a participating economy is the entity who is responsible for the safekeeping of the assets of the passport fund, as shown in the following table:
| Item | Home economy for the passport fund | Responsible holding party |
|---|---|---|
| 1 | Australia | The operator of the passport fund. |
| 2 | Japan | The trust company or a financial institution engaged in trust business designated by the Act on Investment Trusts and Investment Corporations. |
| 3 | Korea | The trust business entity for the collective investment scheme under the Financial Investment Services and Capital Markets Act of Korea. |
| 4 | New Zealand | The supervisor of the registered managed investment scheme who is licensed under the Financial Markets Supervisors Act 2011. |
| 5 | Singapore | An approved trustee under the Securities and Futures Act of Singapore of an authorised scheme. |
| 6 | Thailand | In the case of a scheme established as a mutual fund, the mutual fund supervisor appointed for the mutual fund under the Securities and Exchange Act B.E. 2535 (1992). In the case of a scheme established as a trust, the entity approved by the Securities and Exchange Commission under the Trust for Transactions in Capital Market Act B.E. 2550 (2007) to perform the custodial function of assets of the authorised scheme. |
(2) The function of holding passport fund assets may, subject to any limitation in the laws of the home economy for the fund, be delegated, or sub‑delegated, only if the responsible holding party remains legally responsible for the safekeeping of the fund’s assets as if it held the assets itself. Entities that hold passport fund assets (3) For this section, a custodian for a passport fund is an entity that holds assets of the passport fund. (4) The responsible holding party of a passport fund must ensure that: (a) each custodian meets one of the following criteria: (i) the custodian is authorised in its place of business to carry on a business of holding assets on behalf of others; (ii) the asset holding activity of the custodian is subject to regulatory requirements in the home economy for the fund or the custodian’s place of business; and (b) the operator is not the custodian.
Note: The effect of paragraph (b) in Australia is that, subject to subsection (1)),where the operator would otherwise hold the assets of a passport fund, the operator must delegate the function of holding the assets to another entity.
Assets must be accounted for (5) A custodian of the passport fund must ensure that the assets of the passport fund which it holds are properly accounted for as the passport fund’s assets and identifiable as such in the custodian’s records. Assets must be held separately or in a permitted omnibus account (6) The custodian of a passport fund must hold the passport fund assets: (a) separately from assets that are not assets of the passport fund; or (b) in an omnibus account with the following characteristics: (i) it is managed in accordance with good custodial practice where the account is held and in accordance with reasonable standards; (ii) it is reconciled each business day in the place where the account is held; (iii) it does not also hold any assets of the custodian other than contingent amounts; (iv) the custodian recovers any contingent amount as soon as practicable. (7) For subsection (6), an amount paid into an omnibus account by the custodian is a contingent amount if: (a) it is paid solely to prevent the continuation of a shortfall that occurred because of circumstances that were beyond the custodian’s control or that was not intended by the custodian to arise; and (b) the custodian will be entitled to recover the amount when the circumstances are rectified or addressed. (8) The custodian of a passport fund must ensure that there is separation between the functions of asset holding and investment such that activities that relate to asset holding are being performed by persons who are separate from, and able to act independently from, investment officers, including by ensuring that: (a) no investment officer of the custodian is involved in or responsible for ensuring the holding of the assets of the passport fund; and (b) no investment officer of the custodian directly supervises any other officer of the custodian who is involved in or responsible for ensuring the holding of the assets of the passport fund; and (c) each officer of the custodian that is involved in or responsible for ensuring the holding the assets of the passport fund is independent from each investment officer of the custodian. (9) For subsection (8), an investment officer of a custodian is an officer or employee of the custodian whose responsibilities include investment decisions or trading decisions, whether in relation to the passport fund or otherwise, other than decisions that relate to: (a) deposit accounts; or (b) currency transactions that are conducted for the purposes of facilitating purchase and sale of assets of the passport fund, or other payment obligations of the passport fund, or the redemption, issue, subscriptions, cancellation or repurchase of interests in the passport fund. (10) Paragraph (4)(b) does not apply to a custodian in relation to the following assets held on trust for the members of the passport fund, or, if the passport fund is a body corporate, as an asset of the passport fund, if the operator is subject to regulatory requirements in the home economy for the passport fund in relation to holding those assets: (a) deposits with an entity which is subject to prudential regulation by a financial supervisory authority in an economy where the entity was incorporated which is, in the written opinion of the home regulator for the passport fund, generally largely compliant with the guidelines of the Basel Committee on Banking Supervision if: (i) the entity holds other assets of the passport fund under subsection (4); or (ii) the operator reasonably considers that holding the deposit taking facility by another person would raise unreasonable operational difficulties or be impracticable; (b) assets held for operational purposes that it would not be reasonably practicable for an entity other than the operator to hold; (c) a derivative and any contractual right for the payment of any balance owing to the operator in relation to dealings in derivatives including margining those dealings through transactions in a deposit taking facility.
(1) For these rules, the independent oversight entity of a passport fund in a participating economy is the body shown in the following table:
| Item | Home economy for the passport fund | Independent oversight entity |
|---|---|---|
| 1 | Australia | Each of the external directors of the operator or, if there is a compliance committee of the registered scheme under the Corporations Act 2001, the compliance committee. |
| 2 | Japan | Each external member of the board of company auditors, audit committee, or audit and supervisory committee designated by the Companies Act, or the trust company or a financial institution engaged in trust business designated by the Act on Investment Trusts and Investment Corporations. |
| 3 | Korea | The trust business entity for the collective investment scheme under the Financial Investment Business and Capital Markets Act of Korea. |
| 4 | New Zealand | The supervisor of the registered managed investment scheme who is licensed under the Financial Markets Supervisors Act 2011. |
| 5 | Singapore | An approved trustee under the Securities and Futures Act of Singapore of an authorised scheme. |
| 6 | Thailand | In the case of a scheme established as a mutual fund, the mutual fund supervisor appointed for the mutual fund under the Securities and Exchange Act B.E. 2535 (1992). In the case of a scheme established as a trust, the entity approved by the Securities and Exchange Commission under the Trust for Transactions in Capital Market Act B.E. 2550 (2007) to perform such oversight function over the trust. |
(2) The independent oversight entity must: (a) monitor the operator for compliance with the constituent documents of the passport fund, the laws of the home economy for the passport fund relating to the operation of the passport fund and Divisions 6.2 to 6.5 of the Passport Rules for the home economy for the passport fund; and (b) if, in the reasonable opinion of the independent oversight entity, the operator is required by section 12 of the Passport Rules for the home economy for the passport fund to report non‑compliance with the constituent documents of the passport fund or the laws of the home economy for the passport fund relating to the operation of the passport fund including the Passport Rules for the home economy to the home regulator or a host regulator for the passport fund but fails to do so, notify its opinion including particulars of the non‑compliance to the regulator as soon as practicable but no later than 7 days after forming the opinion. (3) The independent oversight entity must exercise reasonable care and diligence in performing the functions listed in subsection (2) considering the interests of the members of the passport fund. (4) The operator must provide any assistance required by the independent oversight entity to perform its functions.
Annual implementation reviews must be conducted (1) The operator of a passport fund must ensure that an implementation review of the operation of the fund that complies with this section is conducted in relation to each period for which it prepares, or is required to prepare, a financial statement for the fund under the Passport Rules for the home economy for the fund (the review period). (2) If the home regulator for a passport fund has notified the operator of the fund and each host regulator for the fund that this section does not apply, because the home regulator for the fund is satisfied non‑application is appropriate having regard to actions taken or to be taken by the home regulator to check compliance during the review period or on an ongoing basis, and, if applicable, reports to be provided by the independent oversight entity during the review period or on an ongoing basis, then this section does not apply to the passport fund or its operator for the review period or until revoked as the case may be, as set out in the notice. Requirements for the implementation reviewer (3) Subject to subsection (4), the implementation review for a passport fund registered in a participating economy listed in the following table must be conducted by a reviewer that is an entity of the kind shown in the table:
| Item | Home economy for the passport fund | Entity that can conduct implementation reviews (the implementation reviewer) |
|---|---|---|
| 1 | Australia | A registered company auditor, audit firm or authorised audit company under the Corporations Act 2001. |
| 2 | Japan | An external member of the board of company auditors, audit committee, or audit and supervisory committee designated by the Companies Act, the trust company or a financial institution engaged in trust business designated by the Act on Investment Trusts and Investment Corporations or a Certified Public Accountant or an Auditing Corporation designated by the Certified Public Accountants Act. |
| 3 | Korea | A trustee under the Financial Investment Services and Capital Markets Act of Korea. |
| 4 | New Zealand | A licensed auditor under the Auditor Regulation Act 2011 or the supervisor of the registered managed investment scheme who is licensed under the Financial Markets Supervisors Act 2011. |
| 5 | Singapore | A public accountant who is registered or deemed to be registered under the Accountants Act of Singapore or a trustee approved under the Securities and Futures Act. |
| 6 | Thailand | An auditor as defined by the Securities and Exchange Commission or the mutual fund supervisor appointed for the mutual fund under the Securities and Exchange Act B.E. 2535 (1992). |
(4) The implementation review must not be conducted by: (a) the operator; or (b) a related party of the operator. Assistance must be given to the reviewer (5) Each of the following entities must do all things reasonably necessary to assist the conduct of the implementation review: (a) the operator; (b) any delegate of the operator; (c) any custodian of the passport fund; (d) the responsible holding party; (e) the independent oversight entity. Requirements applying where the review must be conducted (6) The operator of a passport fund must ensure that an implementation reviewer is engaged for the passport fund for the purposes of this section at all times. (7) The implementation review must be conducted independently in accordance with standards acceptable to the home regulator for the passport fund. Report of the implementation review (8) The report of the implementation review must be addressed to the operator, the independent oversight entity (where applicable), the home regulator, and each host regulator, for the fund. (9) The report must state: (a) whether any matter has come to the attention of the implementation reviewer that causes the reviewer to believe that, or to believe that it is likely that, the passport fund was not operated in accordance with the Passport Rules for the home economy, or any host economy, for the fund during the review period in all respects that may be material to the persons to whom it is addressed; and (b) if so, particulars of each matter including details explaining the reasons why the reviewer has reason to believe that the passport fund was not operated in accordance with, or was likely not to have been operated in accordance with, the Passport Rules for the home economy, and any host economy, for the fund during that period; and (c) information on the basis for the statements made in paragraphs (a) and (b). (10) The operator of a passport fund must, within 3 months after the end of the review period, provide a copy of the report to: (a) the home regulator for the passport fund; and (b) each host regulator for an economy in which the passport fund had, during the review period, members who became members of the passport fund following an application made in that economy; and (c) each host regulator for an economy in which interests in the passport fund were offered during the period from the beginning of the review period to the time the reports are provided to the home regulator for the passport fund; and (d) the independent oversight entity for the passport fund.
(1) The operator of a passport fund must, in accordance with this section: (a) prepare reports containing financial statements for the passport fund; and (b) ensure that those financial statements are audited, and that an audit report is prepared; and (c) lodge those reports with the home regulator, and each host regulator, for the fund.
Note: In addition to complying with this section, the operator of a passport fund may be required by the laws of the host economy to prepare financial reports and ensure they are audited and an audit report is prepared in accordance with the laws of the host economy, and lodge those reports with the host regulator. See, for example, section 343A of the Corporations Act 2001.
Financial statements of a passport fund (2) The operator must, at least each financial year, in accordance with the prevailing practice for the preparation of audited financial statements for a regulated CIS in the home economy for the passport fund, prepare a report containing the financial statements for the fund for the period covered by the report (the review period). (3) The financial statements of a passport fund must be prepared in accordance with the financial reporting requirements applying to the passport fund. (4) For this section, the financial reporting requirements applying to a passport fund registered in a participating economy are those shown in the following table:
| Item | Home economy for the passport fund | Financial reporting requirements |
|---|---|---|
| 1 | Australia | Requirements imposed under Chapter 2M of the Corporations Act 2001 (including as modified by Part 8B.4 of that Act in relation to a CCIV) and, the accounting standards made by the Australian Accounting Standards Board under that Act. |
| 2 | Japan | Requirement imposed under the Financial Instruments and Exchange Act and other relevant regulations. |
| 3 | Korea | The accounting standards under Article 240 of the Financial Investment Services and Capital Markets Act of Korea. |
| 4 | New Zealand | Requirements imposed under Part 7 of the Financial Markets Conduct Act 2013. |
| 5 | Singapore | The relevant accounting standards made by the Accounting Standards Council under the Accounting Standards Act (Cap. 2B) and the Recommended Accounting Practices (or its equivalent) issued by the Council of the Institute of Singapore Chartered Accountants (or its successors). |
| 6 | Thailand | The Accounting Guidelines for Investment Management business issued by the Association of Investment Management Companies and approved by the Securities and Exchange Commission. |
Audit of financial statements (5) The operator of a passport fund must ensure that the financial statements of the passport fund are audited by a person (the auditor) who is permitted to audit the financial statements of a regulated CIS in the home economy for the passport fund to satisfy the financial reporting requirements. (6) The operator must: (a) ensure that the auditor prepares a report on the financial statements of the passport fund that states that the audit and the report were completed in accordance with the audit requirements applying to audits of financial statements of the passport fund in the following table; and (b) provide all reasonable assistance to the auditor in relation to the audit.
| Item | Economy of the passport fund | Home audit requirements |
|---|---|---|
| 1 | Australia | Requirements imposed under Chapter 2M of the Corporations Act 2001 (including as modified by Part 8B.4 of that Act in relation to a CCIV) and, the auditing standards made by the Auditing and Assurance Standards Board under that Act. |
| 2 | Japan | The Financial Instruments and Exchange Act, the Certified Public Accountants Act and other relevant regulations |
| 3 | Korea | The accounting standards under Article 240 of the Financial Investment Services and Capital Markets Act of Korea.The guidelines for accounting audit of collective investment property under Article 265(2) of Enforcement Decree of the Financial Investment Services and Capital Markets Act of Korea. |
| 4 | New Zealand | Requirements imposed under Part 7 of the Financial Markets Conduct Act 2013. |
| 5 | Singapore | Singapore Standards on Auditing. |
| 6 | Thailand | Thai Standards on Auditing. |
Lodgement of reports (7) The operator of a passport fund must, within 3 months after the end of the review period, lodge a copy of both: (a) the report containing those financial statements; and (b) the audit report relating to those financial statements; with: (c) the home regulator for the passport fund; and (d) each host regulator for an economy in which the passport fund had, during the review period, members who became members of the passport fund following an application made in the host regulator’s economy; and (e) each host regulator for an economy in which interests in the passport fund were offered during the period from the beginning of the review period to the time the reports are provided to the home regulator for the passport fund.
Note: The operator of an Australian passport fund or a notified foreign passport fund is already obliged to lodge copies of the reports with ASIC under section 319 of the Corporations Act 2001.
The operator of a passport fund must not offer interests in the fund as a passport fund in a participating economy other than the home economy for the fund unless: (a) all of the following are satisfied when the interests are offered: (i) there is an ongoing offer of interests in the passport fund in the home economy for the fund; (ii) the offer of interest in the passport fund is subject to the laws of the home economy for the fund that would normally apply to an offer of interests in a regulated CIS to the general public; (iii) the offer is bona fide and does not exclude general subscription by retail investors resident in the home economy for the fund; or (b) all of the following are satisfied when the interests are offered: (i) there is an ongoing offer of interests in a sub‑fund which forms part of the same regulated CIS as the passport fund; (ii) the offer of interests in that sub‑fund is subject to the laws of the home economy for the fund that would normally apply to an offer of interests in a regulated CIS to the general public; (iii) the offer is bona fide and does not exclude general subscription by retail investors resident in the home economy for the fund; or (c) both of the following were satisfied at the time the operator initiated the entry process in relation to the passport fund that the participating economy has implemented under subsection 4(3) of Annex 2 of the Memorandum of Cooperation: (i) at least 30% of the value of interests in CISs for the operation of which the operator is responsible are held by members of those CISs who have provided an address in the home economy for the passport fund, unless the operator is aware the person is not a resident of the home economy for the fund; (ii) the operator has provided a disclosure document to the home regulator for the passport fund that meets the requirements for a disclosure document for an offer of interests in the passport fund that would normally apply to an offer of interests in a regulated CIS that is a passport fund to the general public in the home economy for the fund.
Sourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.
This instrument is the Corporations (Passport) Rules 2018.
This instrument is made under subsection 1211(1) of the Corporations Act 2001.
(1) The Dictionary at the end of these rules defines certain words and expressions, and includes references to words and expressions that are defined elsewhere in these rules. (2) A definition in the Dictionary applies to each use of the word or expression in these rules unless the contrary intention appears. (3) A number of a unit of time refers to calendar days, to be counted so as to exclude the day from which the start of the count is stated to occur and include the day on which the end of the count is stated to occur.
Note: For example, if a time limit is stated to be 7 days and the start of the count is on Monday, 10 May, the time limit is up at the end of Monday, 17 May.
(1) The operator of a passport fund must ensure that the passport fund has a compliant constituent document at all times. (2) For these rules, the constituent document of a regulated CIS is the document shown in the following table:
| Item | Home economy for the passport fund | Constituent document |
|---|---|---|
| 1 | Australia | The constitution of the registered scheme or CCIV required by the Corporations Act 2001. |
| 2 | Japan | The basic terms conditions of the investment trust (if it is an investment trust) or the certificate of incorporation (if it is an investment company) under the Act on Investment Trusts and Investment Corporations. |
| 3 | Korea | Constitutional documents of collective investment vehicles as required by the Financial Investment Services and Capital Markets Act of Korea. |
| 4 | New Zealand | The governing document for the managed investment scheme required by the Financial Markets Conduct Act 2013 of New Zealand. |
| 5 | Singapore | The trust deed or any other document of incorporation required in respect of the collective investment scheme to be authorised under the Securities and Futures Act of Singapore. |
| 6 | Thailand | In the case of a scheme established as a mutual fund, the commitment between the unit holders and the securities company required under the Securities and Exchange Act B.E. 2535 (1992). In the case of a scheme established as a trust, the trust deed as required by the Trust for Transactions in Capital Market Act B.E. 2550 (2007). |
(3) For this section, the constituent document is compliant if the constituent document includes provisions that: (a) have the effect that: (i) each member of the passport fund is entitled to seek remedy against the fund, if it is a legal entity, and its operator, in the member’s choice of the home economy or a host economy for the fund, including through compensation, in relation to loss suffered by the member due to a breach by the fund or its operator of the laws of the home economy for the fund or of the Passport Rules for the home economy or any host economy for the fund, unless: (A) the member and the fund or operator have agreed in writing that the member is not entitled to seek remedy in that place in relation to the particular proceedings; and (B) the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred; or (ii) a specified person, on behalf of any member of a passport fund when it is in the best interests of members, is entitled to seek remedy against the fund, if it is a legal entity, or its operator in the specified person’s choice of the home economy or a host economy for the fund, including through compensation, in relation to loss suffered by the member due to a breach by the fund or its operator of the laws of the home economy for the fund or of the Passport Rules for the home economy or any host economy for the fund, unless: (A) the specified person and the fund or operator have agreed in writing that the member is not entitled to seek remedy in that place in relation to the particular proceedings; and (B) the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred; and (b) have the effect that the passport fund, if it is a legal entity, and its operator agree that where a member of the fund has commenced proceedings against the fund or its operator in a court in the member’s economy, that court will be a convenient forum to hear the proceedings, unless: (i) a similar action has been commenced against the fund or its operator in another economy and it would be reasonable for the member to participate in that action; or (ii) the member and the fund or operator have agreed in writing that the court will not be a convenient forum in relation to that particular proceeding and the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred; and (c) have the effect that the passport fund, if it is a legal entity, and its operator agree that the convenient forum for the fund or its operator bringing an action against a member will be the member’s economy unless the member and the fund or operator have agreed in writing that the court will not be a convenient forum in relation to the particular proceedings and the agreement is effected after the conduct that is or is to be subject to the proceedings has first occurred. (4) For this section, the member’s economy in relation to the passport fund is: (a) the economy in which the member was located when they applied to be accepted as a member of a passport fund if that economy is a participating economy; or (b) in all other cases, the home economy for the fund.
Unless these rules provide otherwise, the operator is responsible for compliance with a provision that is expressed to impose obligations on a passport fund.
(1) The operator of a passport fund must ensure that at all times it has officers with the relevant qualifications. (2) For this section, the operator has officers with the relevant qualifications only if it has the following officers or employees with the qualifications or experience indicated: (a) a chief executive officer (or the equivalent) with at least 10 years’ relevant experience within the previous 15 years as an officer or employee in an IOSCO financial services related business, with 5 of the 10 years in a managerial or supervisory role; (b) at least 2 executive directors (or the equivalent), which may include the chief executive officer, each with at least 5 years’ relevant experience within the previous 7 years as an officer or employee in a managerial or supervisory role in an IOSCO financial services related business; (c) one or more officers or employees, who are when considered together responsible, whether jointly with others or not, for making or supervising all the discretionary investment decisions of the passport fund, each with either: (i) a bachelor degree, or equivalent, or higher qualification in a relevant discipline, together with at least 3 years’ experience within the previous 5 years as an officer or employee with responsibility for making or supervising discretionary investment decisions in an IOSCO financial services related business; or (ii) at least 5 years’ experience within the previous 7 years as an officer or employee with responsibility for making or supervising discretionary investment decisions in an IOSCO financial services related business. (3) For this section and section 9, a reference to supervising discretionary investment decisions includes monitoring and evaluating on behalf of an entity the performance of another entity that makes discretionary investment decisions as a delegate of the first entity, and being significantly involved in decisions about whether the second entity should remain as a delegate in light of its performance.
(1) The operator of a passport fund must at all times meet the financial resources test. (2) For this section, the operator meets the financial resources test if its equity (converted at the relevant exchange rate, where not denominated in USD) is greater than USD 1,000,000 plus additional capital amount. (3) In calculating the operator’s equity: (a) a guarantee or undertaking held by the operator may be counted as if it were an asset if, and only if, it: (i) is unconditional; and (ii) does not give rise to any liability for the operator; and (iii) is payable on demand; and (iv) is provided by a body that is subject to prudential supervision by a financial supervisory authority in the place of its incorporation which is, in the written opinion of the home regulator for the passport fund, generally largely compliant with the guidelines of the Basel Committee on Banking Supervision; and (b) the maximum amount of cover from time to time provided under an approved personal indemnity insurance policy may be counted but only up to 80% of the additional capital amount. (4) For this section:
additional capital amount means 0.001 × (total assets under management in USD converted at the relevant exchange rate minus USD 500,000,000) and is capped at USD 20,000,000 converted at the relevant exchange rate where the operator’s equity is not denominated in USD.
approved personal indemnity insurance policy means a professional indemnity insurance policy that has been approved for this section by the home regulator for the passport fund.
equity of the operator means the net equity being assets less liabilities after taking into account losses and includes any net assets reflected in adjustments for valuation or translation, as it would appear on a balance sheet prepared in accordance with the relevant accounting standards.
relevant accounting standards, for a home economy listed in the following table, has the meaning given in the following table:
| Item | Home economy for the passport fund | Relevant accounting standard |
|---|---|---|
| 1 | Australia | The accounting standards made by the Australian Accounting Standards Board under section 334 of the Corporations Act 2001. |
| 2 | Japan | The accounting standards under the Financial Instruments and Exchange Act and other relevant regulations. |
| 3 | Korea | General accounting principles of financial investment under Article 32 of The Financial Investment Services and Capital Market Act of Korea, and standards for accounting under Article 13 of the Act on External Audit of Stock Companies. |
| 4 | New Zealand | The accounting standards issued by the External Reporting Board under Part 2 of the Financial Reporting Act 2013. |
| 5 | Singapore | The accounting standards made by the Accounting Standards Council under the Accounting Standards Act (Cap. 2B) and the Recommended Accounting Practices (or its equivalent) issued by the Council of the Institute of Singapore Chartered Accountants (or its successors). |
| 6 | Thailand | The Accounting Guideline for Investment Management business issued by the Association of Investment Management Companies and approved by the Securities and Exchange Commission. |
relevant exchange rate means the average of the rates of currency exchange on the first business day in the capital city of the home economy for the passport fund for the year in which the calculation is made, and the first business day in the capital city of the home economy for the passport fund in each of the preceding 4 years.
total assets under management, in relation to an operator, means the sum of the value of:
(a) the assets of each CIS for the operations of which it is responsible; and
(b) any other assets for which it performs discretionary investment management on behalf of another person, whether or not on a collective basis;
as those assets would appear on a balance sheet prepared in accordance with the relevant accounting standards for the operator if they were assets of the operator.
(1) The operator of a passport fund must at all times meet the organisational arrangements test. (2) For this section, the operator of the passport fund meets the organisational arrangements test if it has: (a) a well‑documented organisational structure th
This is an opening excerpt, not the complete document.