3: rigolaysyonisms & oohpereysonisms Flashcards
BSP issuances related to UITFs (Part 1)
→ BSP Circular 447: Unit Investment Trust Fund
→ BSP Circular 577: UITF Exposure Limit to a Single Person or Entity
→ BSP Circular 593: Amendments to the UITF Regulations
→ BSP Circular 675: Allowable Investments of UITFs
→ BSP Circular 676: Cross-currency investment for Peso Trust, Other Fiduciary and IMAs, and Peso UITFs
BSP issuances related to UITFs (Part 2)
→ BSP Memorandum M-2010-033: Clarification on the implementation of Circulars 675 and 676
→ BSP Circular 767: Amendments to the UITF Regulations (Feeder Fund and Fund of Funds)
→ BSP Circular 844: Cross-selling of Collective Investment Schemes
→ BSP Circular 852: Amendments to the UITF Regulations (Minimum disclosure requirements)
→ BSP Circular 853: Creation of Multi-Class UITF
BSP issuances related to UITFs (Part 3)
→ BSP Circular 876: UITFs with unit-paying feature
→ BSP Circular 891: Sales and Marketing Guidelines for Financial Products
→ BSP Circular 907: Amendments to UITF Regulations (CIS of target funds)
→ BSP Circular 1031: Additional Guidelines on the Grant of Licenses/Authorities and Types of Licenses of Permissible Activities
→ BSP Circular 1152: Amendments to the Regulations on Unit Investment Trust Funds (UITFs)
Objectives of the UITF Rules:
To ___________________________________________________________________________ and to ensure differentiation from deposit products
To __________________________________________ to retail investors, enabling them to evolve as major institutional investors that can support the deepening of the domestic capital markets
align the operation of pooled funds with international best
practices
enhance the credibility of
pooled funds
Allowable investments of UITFs
a. Securities issued by or guaranteed by the __________________ or the ___________________________;
b. Tradable securities issued by the _______________________, any ___________________ of a foreign country or any _______________________;
c. ________________________ securities
d. _______________ instruments that are traded in an _____________________;
e. ________ traded in an ___________ market (_________________not allowed);
f. ______ arising from _________________ which are transacted through an exchange recognized by the SEC, subject to the condition that the repo contracts may be ________________ by the ________ administering the UITF and acting as lender, with due notice to its counterparty and the market operator;
g. Units/shares in ____________________________, i.e. Target Funds, including ________________ (or ETFs) and other _____________________ (or CIS), subject to the following:
1. The ________________ of the Target Fund are aligned with that of the ____________
2. The underlying investments of Target Funds are limited to the allowable ________________ as prescribed by the BSP
3. The Target Fund has no investment in ________________________________ and
4. The Target Fund is supervised by a ___________________, as follows:
• A local Target Fund shall either be approved by the BSP or registered with the SEC
• A Target Fund constituted in another jurisdiction shall be registered/authorized/approved, as the case may be, and is recognized as a CIS in its home jurisdiction by a regulatory authority that is a member of the International Organization of Securities Commissions (IOSCO) or any regulatory authority acceptable to the BSP to supervise the CIS.
h. Such other _____________________________as the _______ may allow.
Provided that the investment in peso UITF in tradable foreign currency-denominated financial instruments shall be subject to items “e” and “f” of Subsection X409.6
Provided that a financial instrument is regarded as tradable if quoted two-way prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual regularly occurring market transactions on an arm’s length basis.
Hedging is allowed solely to manage risk exposures.
a. Philippine government; Bangko Sentral ng Pilipinas
b. government of a foreign country; political subdivision; supranational entity
c. Exchange-listed
d. Marketable; organized exchange
e. Loans; organized (promissory notes)
f. Loans; repo agreements; terminated lawfully; trust entity
g. collective investment schemes; Exchange Traded Funds; Collective Investment Schemes
1. investment objectives; Investor Fund
2. investment outlets
3. other collective investment schemes
4. regulatory authority
h. tradable investment outlets /categories; BSP
Investment in securities of UITFs shall be held for _______________ by ___________________________ which shall perform _____________________ of such securities.
safekeeping; BSP accredited third party custodians; independent MTM
Exposure Limits
• The combined exposure of a UITF to any entity and its ______________ shall not exceed ________________________ of the UITF
• A UITF invested, partially or substantially, in exchange traded securities shall be subject to the _____________________________: Provided further, that, in the case of an _________________________ security which is included in an index tracked by the UIT Fund, the exposure limit of the UIT Fund to a single entity shall be the actual benchmark weighting of the issuer or _____________, whichever is higher.
• The above limitation shall not apply to ______________ as defined by the BSP.
• For __________ and ____________, the exposure limit shall be applied on the target fund’s ___________________.
• Investments in any one target fund shall ________________________________ of the target fund.
• related parties; 15% of
the market value
• 15% exposure limit to a single entity/issuer; exchange traded equity; fifteen percent (15%)
• non-risk assets
• feeder fund; fund-of-funds; underlying investments
• not exceed 10% of the total net asset value
Non-risk assets per BSP MORB
Assets considered as non-risk by the BSP includes:
- Cash;
- Debt securities issued by the BSP or the Philippine government;
- Deposits maintained in the lending bank and held in the Philippines;
- Debt securities issued by the U.S. government;
- Debt securities issued by central governments, central banks of foreign countries and multilateral financial institutions such as International Finance Corporation, Asian Development Bank and World Bank, with the highest credit quality given by any two internationally accepted rating agencies;
**- MORB Subsection X330.1*
Exposure Limits
• In case the prescribed exposure limits are breached due to MTM or any extraordinary circumstances which are beyond the control of the trustee, the trustee is given ____________________________________________, or in the case of investor funds, _________________________________ indicating the _________________, to correct the breach.
• At least ___________________________ shall be invested in a _______________________________
• At least ____________________________ shall be invested in _____________ collective investment scheme
• 30 days from the time the limit is breached; 30 days from the date of receipt of report; net asset value of the target fund
• 90% of a feeder fund’s assets; single collective investment scheme
• 90% of a fund-of-funds’ assets; more than one
UITF Disclosures
All marketing materials related to the sale of UITFs must clearly state:
_____, ____________, Fund’s ______, and _________ of units
______________________________ to investing in the Fund in layman’sterms
___________________ details e.g.subs/red conditions,cut-off time
All _________ made against the Fund or class of unit, e.g.trust fees, custody fees
Availability of ____________ upon request
________________ of trustee
________ and ____________________ Standards
Participation is not a __________________ but a _____________; any gain/loss is for the account of the participant; that the trustee is not liable for losses unless upon wilful default, bad faith or gross negligence
Balanced assessment of the possible gains and losses of the UITF and that participation does not __________________________________ and is ____________________
An advisory that the investor must read the ______________ of the Fund in the Plan Rules and make his/her own ___________________ and when necessary seek __________________________ before making an investment.
Name; classification; trustee; classes
General and specific risks attendant
Admin and marketing
charges
Plan Rules
Contact details
Client; Product Suitability
“deposit product”; trust product
carry a guaranteed rate of return; not insured by the PDIC
complete details; risk assessment; independent/professional opinion
No indicative rates of return shall be provided in the PTA. Marketing materials may present relevant historical performance for reference, with a clear statement that past results do not guarantee similar future results.
UITF Disclosures
Disclosures on the Participating Trust Agreement:
• The UITF is a trust product and not a deposit account or an obligation of, or guaranteed or insured by the trust entities or its affiliates or subsidiaries.
• The UITF is not insured or governed by the PDIC.
• Due to the nature of the investment, yields and potential yields cannot by guaranteed.
• Any loss/income arising from market fluctuations and price volatility of the securities held by the UITF , even if invested in government securities, is for the account of the Participant.
• The units of participation of the investor in the UITF, when redeemed, may be worth more or be worth less than his/her initial investment/contribution.
• Historical performance, when presented, is purely for reference purposes and is not a guarantee of similar future results.
• The Trustee is not liable for loss unless upon willful default, bad faith or gross negligence.
UITF Disclosures
For a UITF with income distribution feature, to include the following:
• income for distribution shall be determined by the trustee in accordance with the UITFs’ Plan and are not guaranteed;
• the intended frequency of income distribution;
• the last five distribution dates with information on the income payout rate;
• the manner by which unit income will received;
• that the NAVPu of the fund may immediately decrease as a result of distributing the income of the fund.
• For Feeder/funds fund-of-funds, relevant information on the target fund/s.
UITF Disclosures
The Confirmation of Participation and Redemption shall contain the following:
→ A PTA or Confirmation of Participation and Redemption need not be manually signed by the trustee or his authorized representative if the same is in the form of an electronic document that conforms with _______________ (Electronic Commerce Act).
→ Confirmation of Participation may or may not be a document for _______________ of participation.
• NAVPU of the fund on day of purchase/redemption
• Number of units purchased/redeemed
• Absolute peso or foreign currency value
→ R.A. No 8792
→ redemption
Guidelines for Feeder Funds and Fund of Funds (BSP Circular 767)
• The investment objectives of target funds should be aligned with that of the investor fund
• The underlying investments of the target funds are limited to the allowable investment outlets
set forth in Subsection X410.9/4410Q.9 of the MORB/MORNBFI
• The target fund has no investment in other collective investment schemes
• The target fund is supervised by a regulatory authority as follows:
1. A local target fund shall either be approved by the BSP or registered with the SEC
2. A target fund constituted in another jurisdiction shall be registered/authorized/approved, as the case may be, in its home jurisdiction by a regulatory authority that is a member of the international organization of securities commissions (IOSCO)
Guidelines for Feeder Funds and Fund of Funds (BSP Circular 767)
• The investment objectives of target funds should be aligned with that of the investor fund
• The underlying investments of the target funds are limited to the allowable investment outlets
set forth in Subsection X410.9/4410Q.9 of the MORB/MORNBFI
• The target fund has no investment in other collective investment schemes
• The target fund is supervised by a regulatory authority as follows:
1. A local target fund shall either be approved by the BSP or registered with the SEC
2. A target fund constituted in another jurisdiction shall be registered/authorized/approved, as the case may be, in its home jurisdiction by a regulatory authority that is a member of the international organization of securities commissions (IOSCO)
Guidelines for Feeder Funds and Fund of Funds (TOAP’s General Policy)
The powers, duties and responsibilities of the Investor Fund Trustee must include and define the following:
• Choosing and switching Target Funds
• Suspension of trading the UITF
• Holdings in cash in excess of regulatory or defined cash allocation
• Valuation, subscription and redemption frequencies
Guidelines for Feeder Funds and Fund of Funds (TOAP’s General Policy)
Internal Processes/Disclosures
- Internal process and client disclosure with regards to material changes. Material changes are those that a reasonable investor would consider important to his ____________________________________________
- Switching of Target Funds:
- arketing materials should clearly state that the UITF is structured as a ______________ or ___________________
- Fees should be well documented and properly explained and disclosed to clients:
- Asset allocation ranges for the Target Fund/s must be included in the _________.
- investment decision to buy, hold or sell.
- Minimum information on Target Funds to be disclosed by Trustee:
Fund Manager
Latest available outstanding investments of the Target Fund/s
Fund Objectives
NAV/NAVPU
Historical Performance
Total Expense Ratio - Feeder Fund; Fund of Funds
- Investor Fund Collection of Fees from Target Funds or Target Fund Manager (e.g. rebates or trailer fees)
Fee Charged on UITF on top of Target Fund/s’ management fee
Investor Fund investing in related Target Fund – management fee to be charged only once, either at the level of the Target Fund or the Investor Fund - Plan Rules
• BSP prescribed exposure limits for regular UITFs apply to the Target Fund/s.
• For feeder funds, switching of funds that signify trading activity is strictly prohibited.
Breaches
charged with marketing and selling Feeder Funds and Fund of Funds shall be trained properly. Previously certified UITF marketing personnel must undergo and pass a supplementary course for the selling of Feeder Funds and Fund of Funds.
Marketing Personnel: Certified UITF Sales Personnel (CUSP)
