Mutual funds are the investment equivalent of a frozen dinner. Rather than go through the hassle of walking the supermarket aisles, picking out individual ingredients, packing them up and carrying them home🍒, and then cooking a meal, you can buy a frozen dinner and get everything you want in one convenient package.

However, just as we wouldn't expect a frozen dinner from Hong Kong or Belgium to be the same as one from our local supermarket, we can't expect foreign mutual funds to look the same as those based in the United States.

ᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚThis artic🌼le provides a quick tour of mutual funds and their regulators across the globe.

Understanding Mutual Funds From Around tဣhe World

A mutual fund is a type of investment that allows individuals and institutions, through a single purchase, to invest their money in a variety of financial assets or asset classes, such as stocks, bonds, money markeꦰt securities, precious metals, and other commodities.

Mutual funds can be ideal for the individual investor with limited funds, as they can instantly gain a 澳洲幸运5官方开奖结果体彩网:diversified portfolio even wit🦄h oℱnly a modest amount to invest.

Generally, mutual fun⛎ds are also consღidered to be cost effective, convenient, liquid, and well regulated investments.

Investors don't have to make decisions about which individual stock to buy. They simply decide what 澳洲幸运5官方开奖结果体彩网:portfolio suits t♛heir financial profile and investment goals best.

Different Countries, Different Regulations

Whileꦐ mutual funds from around the world may share common features, one based in Europe falls under a different regulatory environment than a fund that is certified for investment accounts in Hong Kong.

Each country has its own rules and views concerning how a mutual fund is constructed and managed. So it's important to understand how these regulations shape the funds from each country.

Differences Across the Globe

Mutual funds that are available for investment differ depending on where the investor is domiciled. Let's look at some of the regulators and the regulations to see how the rules shape the funds.

The U.S. Market

All mutual funds marketed to U.S. retail investors must be registered with the U.S. Securities and Exchange Commission (SEC). They must abide by the rules set forth under the 澳洲幸运5官方开奖结果体彩网:Investment Company Act of 1940, commonly referred to as the '40s Act. 

Some of the rules under the '40s Act deal with diversification issues. Specifically, Section 12 limits the amount of fund assets that can be invested in other investment companies.

In other words, the rule prohibits a mutual fund from concentrating too many of its holdings in the stock of an 澳洲幸运5官方开奖结果体彩网:investment company.

Another rule, 35d-1, commonly referred to as the "name test," requires that most of a mutual fund's holdings (80%) reflect the fund's name and 澳洲幸运5官方开奖结果体彩网:prospectus.

So, if a fund calls itself an "International Equity Fund," 80% of its holdings should be international equities.

The European Union

Mutual funds authorized for sale in Europe are governed by regulations from the Undertakings for Collecti🐠ve 🌟Investment in Transferable Securities, or UCITS.

The UCITS III version differs from the previous rules by giving more attention to the risk monitoring of 澳洲幸运5官方开奖结果体彩网:derivative positions.

The rules cover🔥 many areas, but like the 1940s Act in the U.S., some deal with proper diversifiಌcation by making sure that a fund does not concentrate its holdings to too great a degree.

To market your fund across all member countries of the 澳洲幸运5官方开奖结果体彩网:European Union, you need only register your fund in one EU country under the authority of that country's financ𝓰ial regulator.

For example, in Ireland, the Central Bank of Ireland is in charge of banking and financial regulation. Its role is to protect the best interests of consumers of financial services.

The Hong Kong Market

Hong Kong's rules are the most restrictive. There are two fund governing bodies in the Hong Kong market: the 澳洲幸运5官方开奖结果体ꦰ彩网:Securities an♈d Futures Commission (SFC) and the Mandatory 澳洲幸运5官方开奖结果体彩网:Provident Fund Schemes Authority (MPFSA).

The SFC's rules are broader and not as specific or restrictive as the rules set forth by the MPFSA. The former apply to all funds marketed in Hong Kong, no matter the type of mutual fund.

In c🔜ontrast, MPFSA only governs funds that are marketed for use in the retirement accounts of its residents. Funds suitable for investment in retirement accounts must address both regulatory bodies.

However, as the MPFSA ru꧙les are more restrictive than SFC rules, fund managers can usually concentrate on the MPFSA rules, knowing that compliance with these♔ rules will usually ensure compliance with the broader rules as well.

The MPFSA's goal is to ensure that the nest eggs of its residents are protected and not invested in funds of a speculative nature. It takes compliance with its rules very seriously.

Some of the more restrictive rules deal with unrated, or below-澳洲幸运5官方开奖结果体彩网:investment grade, securities, and 澳洲幸运5官方开奖结果体彩网:unlisted securities. The MPFSA requires that 澳洲幸运5官方开奖结果体彩网:bond mutual funds must sell bonds they hold that have been downgraded below investment grade, even if they were inve🐠stment grade at the time of purchase.

The rules also place emphasis on approved exchanges. The MPFSA provides its own list of approved stock exchanges. No more than 10% of a mutual fund's securities may be allocated to contain stocks not listed on one of these approved exchanges.

Other Markets

Other markets also have their own structure and regulations. In Canada, mutual funds are subject to provincial securities laws as well as national rules known as NI 81-102.

The NI stands for "National Instrument." For example, dealers who sell mutual funds must be registered with the secu💝rities regulator🐲 of their province, while the mutual fund asset manager must ensure that the fund they manage abides by the NI 81-102 rules.

Another market that is currently opening up to outside fund managers is Taiwan. In Taiwan, the regulator is the Financial Supervisory Committee (FSC). There are only about 20 rules specific to mutual funds marketed in Taiwan, but this is still an evolving market.

Can You Buy a Fund from Another Country?

If you ar🐲e an 🌱investor in the U.S., the SEC allows you to buy only funds that have registered with it. This regulation protects U.S. investors, as a fund that is registered with the SEC is regulated according to U.S. securities law.

Other countries have similar warnings. For instance, if you are a Hong Kong resident looking to invest for your retirement, your choice of funds is limited to those regulated by Hong Kong's aforementioned MPFSA.

Global Fund vs. International Fund

A global fund that is established in the U.S. invests in assets from around the world, including the U.S.

An international fund that is established in the U.S. in𒁃vests in foreign securities from the entire world, except the U.S.

Both of these types of funds must be registered with the SEC🐭 before U.S. investors can buy them.

Common Traits of Mutual Funds Everywhere

1. All mutual funds pool the many smaller deposits of individual investors so that they can make large purchases of securities.
2. Most mutual funds are available to both retail clients (individual investors) and 澳洲幸运5官方开奖结果体彩网:institutional clients (large companies, foundations, organizations.).
3. There is usually a wide selection of funds, both by company and style in each country, including a good variety of stock, bond, money market and 澳洲幸运5官方开奖结果体彩网:balanced funds (which blend, for example, stocks and bonds in the same fund).
4. Every major country or world region has specific rules pertaining to the registration, marketing, and sale of funds. Regulations are in place to protect the consumer; this helps to ensure that 澳洲幸运5官方开奖结果体彩网:asset managers keep the interests of the investor above their own, and that the investor does not get taken advantage of.

It💞 is very important that investors feel confident that the proper authority is monitoring the industry as a whole so that they can entrust their savings in a mutual fund. If investors lacked confidence, the industry would likely falter.

The Bottom Line

Understanding the differences among financial regulators is very important for a 澳洲幸运5官方开奖结果体彩网:mutual fund manager. A manager with funds registered in different regulatory environments n💟eeds to ensure t🧸hat they know what, legally, they can and cannot do in foreign countries.

Breaching a rule, especially a majo✤r one, can give a fund and its manager a bad reputation, a fine, or both.

Investors generally should be aware of the differences in mutual funds available internationally. They should understand where the෴y can and cannot invest in mutual fu🐟nds.