Asia — international trends and local operational developments

Internationally, the US Foreign Account Tax Compliance Act (FATCA), Basel III, and anti-money laundering legislation remain of central concern to financial institutions in Asia. Non-US institutions are struggling to anticipate the likely effects of this legislation and manage transaction documentation in the light of new requirements. FATCA is moving up the agenda rapidly, given the looming start date. Basel III is also more sharply in focus as institutions try to come to terms with the operation of the new regime. Anti-money laundering remains an important area of focus for regulators, particularly where there is an overlap with market misconduct and manipulation.

How these international developments knit into the day-to-day operations of an institution in combination with local requirements remains a key challenge. Indeed, given the volume of material that needs to be digested, overloaded legal and compliance staff in this region may themselves constitute an area of potential risk in institutions.

In Hong Kong, the regulators have recently initiated a consultation to explore the future treatment of ‘professional’ investors. Although the access of professional investors to ‘private placements’ is to be undisturbed, the regulators want to consider who should be classified as a ‘professional’ for these purposes. Should individuals or corporate professionals still be able to participate in such activities or should it be left to true institutional investors? Should monetary thresholds (a crude marker for qualification) as to who can qualify as a professional be increased? Suitability and other Code of Conduct requirements are potentially going to be applied to all individual investors and their vehicles, not to institutions or (where sufficiently knowledgeable and experienced) corporations…

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