Australia Securities & Investments Commission Seeks Comment on Policies for U.S. Mutual Fund Sales

Washington, DC, June 7, 1999 - The Australia Securities & Investment Commission (ASIC) announced amendments to a number of its policy statements related to collective investment pools and requested comment on its policy regarding foreign investment pools. ASIC has confirmed that it will grant relief to U.S. mutual funds to facilitate the offering and sale of U.S. mutual fund shares in Australia.

In Policy Statement 136, ASIC stated that it intends to undertake a review of Policy Statement 65, which sets forth ASIC's policy regarding foreign investment pools. According to PS 65, ASIC will grant conditional relief on a case-by-case basis to the operator of a foreign investment pool from certain procedural and disclosure aspects of their securities laws. The relief is provided when ASIC considers that the regulatory regime under which the foreign investment pool operates provides a comparable level of investor protection.

ASIC is reviewing PS 65 in light of certain changes to Australia's corporate and tax law that are expected to take retroactive effect from July 1, 1998, including the proposed exemption for U.S. funds from the rules on the taxation of foreign investment funds (FIFs). It is anticipated that the Australian Parliament will act favorably on the proposed exemption in the near future.

In light of these anticipated changes, ASIC has clarified that it will grant relief to U.S. mutual funds in accordance with the policies set out in PS 65. ASIC also invited comment about new issues related to the operation and regulation of foreign investment pools that ASIC should take into account during its more general review of PS 65.

Australia has special tax rules that discourage Australian residents from purchasing shares in offshore mutual funds. Several years ago, the Institute submitted a comment letter requesting an exemption from the FIF rules for investments in U.S. funds that qualify as regulated investment companies (RICs) for U.S. federal income tax purposes. In mid-1998, a bill was introduced to amend the FIF rules to exempt interests in RICs, as well as interests in other types of U.S. entities, including corporations, real estate investment trusts, and, in some cases, common trust funds and entities taxed as partnerships. The exemptions are proposed to be effective for notional accounting periods of Australian investors ending after July 1, 1998.