June ComplianceAsia newsletter comments

June, while it now seems a little distant, was another interesting month around the region.

Further developments regarding foreign investor participation in the Chinese markets is to be
welcomed but our sense is that now is the time when those who have had joint venture relationships or a foothold in this market are turning their attention to establishing a more robust, internationally consistent compliance regime. The super profits generated in the China market in 2007 will not be coming without risk. We expect to see all sorts of shenanigans come out when the market corrects or, as is often the case in China, when someone who wanted to be part of the scheme, but was left out, decides to blow the whistle.

We have previously reported on the Hong Kong SFC steps in relation to streamlining the registration process for hedge fund managers and advisors already registered offshore. We can report that our own experience with the new system is positive and we continue to see enhancements in regulatory practice at the micro level in Hong Kong.

While there are many arguments for and against changes to the regulatory infrastructure in Hong Kong, most market participants would agree that change has been needed in the way regulation is conducted on a day to day basis. The hedge fund changes set out in this report are really just a process of reform of several areas where small changes can make a lot of difference for those regulated by the SFC.

The Hong Kong Monetary Authority has recently been making noises about systemic risk with hedge funds and other capital flows. Readers may wish to check out the Chief Executive’s blog .

India continues to be a challenging environment for hedge funds with the Government thus far refusing to let hedge funds trade directly. While SEBI seems to be softening its views, the Reserve Bank of India does not. In our view the RBI is the key player here and we don’t yet see major political interest in changing the status quo. In the interim funds will continue to pay higher fees and transaction costs.

For those of your north of the equator, enjoy your summer months and hopefully not too many
typhoons, for those south, enjoy the winter and the footy, and for those of us in the middle, well its just more of the same.