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Regulations & Structure Flashcards

1
Q

FIMM

A

Federation of Investment Managers Malaysia

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2
Q

FIMM Objectives

A

Improve regulatory, fiscal and legal environment

Ensure sound & ethical business & practices

Provide information, assistance & other services

Promote public awaress of the benefits and risks of investing in unit trust

Agree on standards of practice for protection of unit holders

Improve regulations

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3
Q

Other regulators

A

BNM, SSM, Bursa

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4
Q

Securities Commision

A

Main regulator

Regulate all matters relating to unit trust industry

To ensure that the provisions of securities laws are complied with

To license and supervise all licensed persons as may be provided for under any securities law

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5
Q

Capital Markets & Services Act 2007

A

Main law to govern the unit trust industry

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6
Q

Reporting to Unit Holders

A

Interim Reports

Annual Reports

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7
Q

Interim Reports

A

For 6 months of financial year

endorsed by directors

investment objectives & policies

average annual return over 1,3,5, years and since launch

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8
Q

Minimum contents

A

Managers report

Trustees Report

Financial statement

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9
Q

Annual Report

A

Full financial year

Audited

Investment objectives

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10
Q

Recognized Distributors

A

UTMC - tied agent (UTC) and staff

IUTA - banks and staff

CUTA - Financial representative first

IUTA/CUTA must nominated minimum 2 UTS at distribution point

Authorization Card by FIMM

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11
Q

Agency Structure

A

Agent (UTC)

Agency Supervisor

Agency Manager

Group Agency Manager

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12
Q

UTC eligibility requirements

A

At least 21 years old

Attained Grade 3 in SPM

Pass qualifying exam

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13
Q

Size of Agency

A

Cannot exceed 50 persons per agent

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14
Q

Types of UTS

A

Open End Funds

Closed End Funds

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15
Q

Open End Funds

A

Units not quoted on stock exchange

Price based on Net Asset Value

Prices remain unchanged with the same training day

Size of fund would increase with creation of units and decrease with the cancellation of units

Transacted directly with UTMC

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16
Q

Closed End Funds

A

Units quoted and traded on stock exchange

Prices determined by market forces of demand & supply

Prices fluctuate throughout the day and from time to time

Size of fund remains unchanged until the next public issue

Investors can only sell their units through th exchange

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17
Q

Equity Fund

A

Aggressive Growth Fund

Index Fund

Income Fund

International Fund

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18
Q

Bond Fund

A

Money Market Instruments

Corporate Bond

Government Securities

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19
Q

Bond Funds Characteristics

A

regular income with less empahsis on capital growth

More secure

portfolio diversification

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20
Q

Equity: Aggressive growth fund

A

An aggressive growth fund is a mutual fund that seeks capital gains by investing in the shares of growth company stocks. (small + mid cap)

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21
Q

Balanced Fund

A

60% equitie 40$ fixed income and liquid assets

lower volatility with more exposure

e

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22
Q

Money Market Fund

A

Unit price set at fixed amount

Low risk money market instruments

Highly liquid

Income distributions to investors paid regularly

23
Q

Equity: Index Fund

A

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500)

24
Q

Income Fund

A

Income funds are mutual funds or ETFs that prioritize current income, often in the form of interest or dividend paying investments.

25
Exchange Traded Fund
Mirror the index (more than index fund) Invest all securities / a representative sample of the securities Low expense ratios (replicate index) Bought and sold through a stockbroker
26
REIT
Real Estate Investment Trust Invest in real property Returns- rental income and capital apprciation Most are listed on stock exchange Units in listed REIT can be bought and sold through stockbrockers
27
International fund
An international fund is a mutual fund that can invest in companies located anywhere in the world outside of its investors' country of residence.
28
Difference between ETF & Index Fund
The biggest difference between ETFs and index funds is that ETFs can be traded throughout the day like stocks, whereas index funds can be bought and sold only for the price set at the end of the trading day.
29
Government Sponsored Fund
Invest on a balanced basis although equity-invested UTS are also available Equity invested Fixed RM1.00 unit price
30
Shariah Fund
Catered for Shariah concerned investors invest in halal companies based on Shariah principle avoid riba (no promise of interest)
31
Shariah Regulatory Framework
Trustee (same for shariah and conventional) UTMC (shariah commitee/advisor)
32
Syariah Advisory Council
Under the Securities Commission
33
Syariah Committee/ Syariah Advisor (UTMC)
Registered & approved by Securities commission To ensure funds are managed and administered in accordance with Shariah principles
34
Appointment of Syariah Commitee
1. Registered with SC & renewable every 3 years 2. At least 3 independent members 3. 1 Full-time officer responsibile for Shariah matters relating to the funds 4. Notifies SC on resignation of any member/ committee 5. Vacates position immediately if subject to disqualitification
35
Musyarakah
Syariah - Unit Holders (masyarakat) Contract exists among the investors agree on profit sharing/ loss sharing
36
Bai
Syariah - Sale & Purchase contract executed between unit holders and the UTMC
37
Wakalah
Syariah - UTMC (agency) (wakil) UTMC is acting on behalf of unit holders to invest and manage the US
38
Wadiah Yad-Dhamanah
guaranteed custodian Owners of the units are unit holders & UTMC is custodian before the units are created
39
After Units Created
Trustee holdss money
40
Before Units Created
UTMC holds money
41
Before Units Created
UTMC holds money
42
Risk & Return
Low to High Money Market Funds Fixed Income Funds Balanced Funds Equity Funds Hedge Funds
43
Risk in Unit Trust
Country Risk Interest Rate Risk
44
Risk in Unit Trust
Country Risk Interest Rate Risk Risk of Non-compliance Managers Risk Currency Risk Market Risk Liquidity Risk Specific Security Risk Credit Risk Risk of Shariah non compliance
45
Interest rate risk
Interest rate movements impact stock market and bond market interest rate inversely related to stock & bond prices when interest rate up, stock & bond price goes down
46
Interest rate risk
Interest rate movements impact stock market and bond market interest rate inversely related to stock & bond prices, when interest rate up, stock & bond price goes down money market correlates with interest rate interest up = money up
47
Risk of Non - Compliance
Non-conformance with regulations & internal policies via Manager or system failure
48
Managers Risk
Asset allocation & stock selection undertaken by the Manager may adversely impact the performance of the fund
49
Currency risk
Foreign currency fluctuations
50
Market Risk
Economic conditions
51
Liquidity Risk
Ability to dispose near fair value
52
Specific Security Risk
Adverse price movement of a particular security which adversely affect the funds NAV & unit price
53
Credit Risk
Bond issuer defaulting in payments of interest and principal adversely affecting value of fund (bond funds - cannot pay bond maturity )
54
Shariah Non-Compliance
must sell funds as no longer compliant

Public Mutual (3 decks)

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