AsianInvestor's regulatory roundup, Apr 16

India: Ban on foreign investment in short-dated govvies
The Securities and Exchange Board of India (Sebi) has banned foreign investors from buying government debt of less than one year in maturity.

The rule, which came into force on April 7, comes as the India seeks to attract more long-term investors into the market.

Separately, Sebi sent out a circular in early April to domestic fund houses requiring them to disclose their monthly asset details, and to explain the decisions when exercising voting rights in the firms that they invest in, effective April 1.

India: FDI pricing restriction removal welcomed
Law firm DLA Piper has welcomed the relaxing of pricing restrictions by the central bank on the entry and exit of foreign direct investors in listed and unlisted Indian equities. The change was announced on April 1, with operational guidelines due to be published soon.

Currently when a foreign investor buys or sells shares from an Indian investor, those shares are subject to a set floor or ceiling price. It is expected that the buying or selling price will in future be determined on the basis of an acceptable market price rather than the floor or capped maximum price, says DLA Piper.

“The relaxation of pricing restrictions by the RBI [Reserve Bank of India] will ensure simplicity, parity and greater flexibility for foreign investors, as it allows the market participants to determine the pricing of the entry and exit of their investment and aligns it with international practices,” adds the law firm.

International: Luxembourg signs Fatca agreement
Luxembourg and the US signed an intergovernmental agreement (IGA) on March 28 to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (Fatca).

This follows their agreeing, on February 27, the substance of the model 1 agreement.

As part of the signing of the IGA, the Luxembourg tax administration has set up two working groups bringing together different entities from the public and private sectors to implement the automatic exchange of information.

Fatca will require non-US financial institutions to share financial information on their US-based clients with a view to preventing tax evasion, and is expected to be implemented by July.

Hong Kong: HKEx chair criticises ‘one share, one vote’
The chief executive of the Hong Kong Stock Exchange (HKEx) has criticised the ‘one share, one vote’ rule that led Alibaba, the Chinese e-commerce site, to list in the US.

Alibaba’s management structure – which allows for senior management to maintain control of the board of directors – was a sticking point for Hong Kong, as the city's exchange prohibits dual-class share structures that give shareholders more than one vote per share.

In a blog post this week, HKEx CEO Charles Li says ‘one share, one vote’ does not necessarily protect minority shareholders, but those who own more of a firm’s shares and therefore have more voting strength.

“In a company with a controlling shareholder, the regulatory focus is always on protecting minority public investors against possible wrongdoing,” says Li. “The ‘one share, one vote’ principle actually works in the opposite way here.”

Taiwan: Morningstar urges clear rules on new ETFs
Morningstar has welcomed the coming launch of new types of exchange-traded funds (ETFs) in Taiwan, as they will give investors more choice.

But the fund research firm urges regulators to set out clear and comprehensive rules to safeguard investor interests and to provide sufficient investor education.

This comes as the Taiwan Stock Exchange expects to list the first futures ETF by the second quarter as part of moves to relax the rules and broaden the ETF market, said Michael Lin, president of the exchange in a recent interview with Taiwan's China Times. 

In February, the Financial Supervisory Commission relaxed the rules, allowing asset managers to launch ETFs that buy futures contracts.

By the end of the year, leveraged, inverse and renminbi ETFs may also list on the TWSE, reports the China Times.

Yuanta, the biggest mutual fund house in Taiwan, says it will launch such ETFs in the future once the rules allow them. It also plans to launch the island’s first commodity ETFs.

International: Asian buyside not ready for clearing rules
Asian institutional investors remains unprepared for regulation of over-the-counter derivatives markets coming in under the European Market Infrastructure Regulation (Emir) and US Dodd-Frank Act.

So concludes a new study, Asia-Pacific OTC Derivatives Clearing 2014, from capital markets consulting firm GreySpark Partners.

Buyside and sellside firms in Asia Pacific will not be able to avoid OTC derivatives reform, but they do have a choice in how early they can act and the extent of their preparation for the deadlines, says Andrew McLauchlan, Hong Kong managing director of GreySpark.

In this respect, Asia-Pacific-based firms have a "third-mover advantage" and should capitalise on lessons learnt by the US and EU before them, he adds.