USD- and other Foreign Currency-Denominated Securities
In general, securities in the regional bond market must be registered in the market where the issues will be listed and sold.
Securities sold in the US, unless qualified for exemption under the Securities Act of 1993, must be registered with the US Securities and Exchange Commission (SEC).
The registration statement and prospectus are made public shortly after SEC filing. The registration statement is also subject to examination for compliance with disclosure requirements. Not all offerings must be registered with the SEC. Rule 144A enables issuers to access US institutional capital markets without registration. For the procedures involved see the relevant SEC link below.
Bonds can also be issued as global offerings. These usually include a US tranche privately-placed and issued under Rule 144A or publicly-offered; and an international tranche placed pursuant to Regulation S outside the US, typically in European markets. Regulation S, which was adopted in 1990, clarifies the conditions under which securities offered or sold to investors outside the US are not subject to SEC registration requirements.
Local Currency Securities
In 2006, the Asian Development Bank (ADB) pioneered a multi-currency bond platform that links domestic capital markets. Under the program, Asian currency bonds are issued in domestic markets under a single unified framework with a common set of documents and in accordance with English law.
For market specific information on local bond issuing procedures, please refer to the market home pages.
For securities issued in accordance with shari'a principles, the International Islamic Financial Market (IIFM) will be issuing guidelines for Islamic financial instruments. IIFM will post the guidelines on its website once they have been finalized.
Under the US Securities and Exchange Act, market participants such as exchanges, brokers, dealers, transfer agents, and clearing agencies are required to register with the US Securities and Exchange Commission (SEC). Registration rules for these key participants are linked below. Compliance guidelines, including rules of conduct for brokers and dealers are also provided.
Local Currency Securities
For market specific information on local licensing rules and regulations, please refer to the individual market home pages.
Presenting investments at mark-to-market (or their most recent measurable current value) is a useful tool for investors, creditors, and other decision makers in bondholding institutions. Most markets require mark-to-market reporting of bond investments in accordance with domestically-accepted accounting standards. Asian economies have adopted, or are moving towards adopting, international mark-to-market accounting standards.
International standard guidelines are provided by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). FASB is the accounting standards board in the United States while IASB is a London-based international accounting body that promotes convergence of global accounting standards.
FASB’s Statement of Financial Accounting Standards No. 107—Disclosures about Fair Value of Financial Instruments requires entities to disclose the fair value of financial instruments (both assets and liabilities) when practicable. FASB’s Statement of Financial Accounting Standards No. 115—Accounting for Certain Investments in Debt and Equity Securities addresses accounting and reporting standards for investments in debt and equity securities.
Bond investments can be classified under three categories:
- Securities held-for-trading are reported at fair value. These are securities bought and held for the purpose of selling them in the short run. Unrealized gains and losses are included in earnings.
- Held-to-maturity securities are reported at amortized cost. These are debt securities that a company has the positive intent and ability to hold to maturity.
- Available-for-sale securities are reported at fair value. These are securities not classified in either of the above two categories. Unrealized gains or losses are excluded from earnings and are reported as a separate component of shareholders’ equity.
IASB also publishes similar regulations—International Accounting Standards (IAS) No. 32 (Financial Instruments: Disclosure and Presentation) and IAS No. 39 (Financial Instruments: Recognition and Measurement). Refer to the links below for more details.
Most East Asian markets require investment funds (mutual funds or unit trusts) to publish and calculate net asset values (NAV) based on current, or mark-to-market, values of financial instruments in their portfolios. Regulations from securities commissions in the region generally require daily calculations. Please refer to the summary table below.
Capital Adequacy Regulations
Banking regulations in most East Asian countries are moving towards full implementation of the capital adequacy framework commonly known as Basel II. This framework requires that positions in financial instruments held in an institution’s trading book be marked to market at least daily. The Basel II framework for prudent valuation practices is provided for under Pillar I—Minimum Capital Requirements.
Mark-to-market practices are already used to measure risk of financial institutions in relation to capital adequacy requirements. Refer to individual market pages for specific mark-to-market regulations.
Those elements of the tax environment that are relevant to bond issuance or investment for each market in the region are broadly summarized in the table below.
For more specific information on local taxation laws, please refer to the individual market home pages.