Pursuant to Monetary Board Resolution No. 1499 dated 27 December 2007, Subsections X410.6/4410Q.6 and X410.7/4410Q.7 of the Manual of Regulations for Banks (MORB)/Manual of Regulations for Non-Bank Financial Institutions (MORNBFI), respectively, are hereby amended to read as follows:
SECTION 1. "Subsection X410.6/4410Q.6 Plan rules. Each UIT Fund shall be established, administered and maintained in accordance with a written trust agreement drawn by the trustee, referred to as the "Plan" which shall be approved by the Board of Directors of the trustee and a copy of which shall be submitted to the Bangko Sentral for PROCESSING AND approval prior to its implementation. EACH NEW UIT FUND PLAN FILED FOR APPROVAL SHALL BE CHARGED A PROCESSING FEE OF P10,000.00.
The Plan shall contain the following minimum elements:
a. Title of the Plan. This shall correspond to the product/brand name by which the UIT fund is proposed to be known and made available to it's clients. THE PLAN RULES SHALL STATE THE CLASSIFICATION OF THE UIT FUND (E. G., MONEY MARKET FUND, BOND FUND, BALANCED FUND AND EQUITY FUND).
b. Manner by which the fund is to be operated. A statement of the fund's investment objectives and policies including limitations, if any.
c. RISK DISCLOSURE. THE PLAN RULES SHALL STATE BOTH THE GENERAL RISKS AND RISKS SPECIFIC TO THE TYPE OF FUND.
d. investment powers of the trustee with respect to the fund, including the character and kind of investments, which may be purchased, by the fund. There must be an unequivocal statement of the full discretionary powers of the trustee as far as the fund's investments are concerned. These powers shall be limited only by the duly stated investment objective and policies of the fund.
e. The unitized NAVPu valuation methodology as prescribed under Subsection UX410.5.d /U4410Q.5.d shall be employed.
f. Terms and conditions governing the admission or redemption of units of participation in the fund. THE PLAN RULES SHALL STATE THAT THE TRUSTEE, PRIOR TO ADMISSION OF A CLIENT'S INITIAL PARTICIPATION IN THE UIT FUND, SHALL CONDUCT A CLIENT SUITABILITY ASSESSMENT TO PROFILE THE RISK-RETURN ORIENTATION AND SUITABILITY OF THE CLIENT TO THE SPECIFIC TYPE OF FUND, if the frequency of admission or redemption is other than daily; that is any business day, the same should be explicitly stated in the Plan rules: Provided that the admission and redemption shall be based on the END OF DAY NAVPU OF THE FUND COMPUTED AFTER THE CUT-OFF TIME FOR FUND PARTICIPATION AND REDEMPTION FOR THAT REFERENCE DAY, IN ACCORDANCE WITH EXISTING BSP REGULATIONS ON MARK TO MARKET VALUATION OF INVESTMENT SECURITIES.
g. Aside from the regular audit requirement applicable to all trust accounts, an external audit of each UIT funds shall be conducted annually by an independent auditor acceptable to the BSP and the results thereof made available to participants. The external audit shall be conducted by the same external auditor engaged for the audit of the Trust Entity.
h. Basis upon which the fund may be terminated. The RULES shall state the rights of participants in case of termination of the fund. Termination of the fund shall be duly approved by the trustee's Board of Directors and a copy of the resolution submitted to the appropriate department of the BSP.
i. Liability clause of the trustee. There must be a clear and prominent statement adjacent to where a client is required to sign THE PARTICIPATING TRUST AGREEMENT THAT (1) THE UIT FUND IS A TRUST PRODUCT AND NOT A DEPOSIT ACCOUNT OR AN OBLIGATION OF, OR GUARANTEED, OR INSURED BY THE TRUST ENTITY OR ITS AFFILIATES OR SUBSIDIARIES; (2) THE UIT FUND IS NOT INSURED OR GOVERNED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC); (3) DUE TO THE NATURE OF THE INVESTMENT, YIELDS AND POTENTIAL YIELDS CANNOT BE GUARANTEED; (4) ANY LOSS/INCOMARISING FROM MARKET FLUCTUATIONS AND PRICE VOLATILITY OF THE SECURITIES HELD BY THE UIT FUND, EVEN IF INVESTED IN GOVERNMENT SECURITIES, IS FOR THE ACCOUNT OF THE CLIENT/PARTICIPANT (5) AS SUCH, THE UNITS OF PARTICIPATION OF THE INVESTOR IN THE UIT FUND, WHEN REDEEMED, AMY BE WORTH MORE OR BE WORTH LESS THAN HIS/HER INITIAL INVESTMENT/CONTRIBUTORS; (6) HISTORICAL PERFORMANCE, WHEN PRESENTED, IS PURELY FOR REFERENCE PURPOSES AND IS NOT A GUARANTEE OF SIMILAR FUTURE RESULT; AND (7) THE TRUSTEE IS NOT LIABLE FOR LOSSES UNLESS UPON WILLFUL DEFAULT, BAD FAITH OR GROSS NEGLIGENCE.
j. Amount of fees/commission and other charges to be deducted from the fund. The amount of fees that shall be charged to a fund shall cover the fund's fair and equitable share of the routine administrative expenses of the trustee such as salaries and wages, stationery and supplies, credit investigation, collateral appraisal, security, messengerial and janitorial services, EDP expenses, BSP supervision fees and internal audit fees. However, the trustee may charge a UIT fund for special expenses IN CASE SUCH EXPENSES ARE (1) NECESSARY TO PRESERVE OR ENHANCE THE VALUE OF THE FUND, (2) PAYABLE TO A THIRD PARTY COVERED BY A SEPARATE CONTRACT, AND (3) DISCLOSED TO PARTICIPANTS. THE TRUSTEE SHALL SECURE PRIOR BSP APPROVAL FOR OUTSOURCING SERVICES PROVIDED UNDER EXISTING REGULATIONS. No other fees shall be charged to the fund.
Marketing or other promotional related expenses shall be for the account of the trustee and shall be presumed covered by the trust fee.
k. Such other matters as may be necessary or proper to define clearly the rights of participants in the UIT Fund. The provisions of the plan shall govern participation in the fund including the rights and benefits of persons having interest in such participation, as beneficiaries or otherwise. The Plan may be amended by a resolution of the Board of Directors of the trustee: Provided however, That participants in the fund shall be immediately notified of such amendments and shall be allowed to withdraw their participation within a reasonable time but in no case less than thirty (30) calendar days after the amendments are approved, if they are not in conformity with the amendments made thereto: Provided further, That amendments to the plan shall be submitted to the Bangko Sentral within ten (10) business days from approval of the amendments by the Board of Directors. FOR PURPOSES OF IMPOSING MONETARY PENALTIES PROVIDED UNDER SUBSECTIONS X162.2/4162Q.3OFTHEMORB/MORNBFI, RESPECTIVELY, FOR DELAYED SUBMISSION OF REPORTS, THE AMENDMENTS TO THE PLAN SHALL BE CONSIDERED AS "CATEGORY A-3" REPORT. The amendments shall be deemed approved after thirty (30) business days from date of completion of requirements.
A copy of the Plan shall be available at the principal office of the trustee during regular office hours, for inspection by any person having an interest in the fund or by his authorized representative. Upon request, a copy of the plan shall be furnished such interested person."
SECTION 2. "Subsection X410.7/4410Q.7 Minimum disclosure requirements.
a. Disclosure of Unit Investment Trust Fund investments. A list of prospective and out standing investment outlets shall be made available by the trustee for the review of all UIT Fund clients. Such disclosure shall be substantially in the form hereto attached as Appendix 'A'
*. The list of investment outlets shall be updated quarterly.
b. Distribution of investment units. The trustee may issue such conditions or rules, as may affect the distribution of investment units subject to the minimum conditions enumerated hereunder.
(1) Marketing Materials. All printed marketing materials related to the sale of a UIT Fund shall clearly state:
a) The designated name and CLASSIFICATION of the fund and the fund's trustee.
b) Minimum information regarding:
(i) The general investment policy and applicable risk profile. THERE SHALL BE A CLEAR DESCRIPTION/EXPLANATION OF THE GENERAL RISKS ATTENDANT WITH INVESTING IN A UIT FUND, INCLUDING RISK SPECIFIC TO A TYPE OF FUND. TECHNICAL TERMS SHOULD LIKEWISE BE DEFINED IN LAY MEN'S TERMS.1
(ii) Particulars or administrative and marketing details like pricing and cut-off time.
(iii) All charges made/to be made against the fund, including trust fees, other related charges.
(iv) The availability of the Plan rules governing the Fund, upon the client's request.
(v) CLIENT and Product Suitability Standards. PRIOR TO ADMISSION, THE TRUSTEE SHALL PERFORM A CLIENT PROFILING PROCESS FOR ALL UIT FUND PARTICIPANTS UNDER THE GENERAL PRINCIPLES ON CLIENT SUIT-ABILITY ASSESSMENT TO GUIDE THE CLIENT IN CHOOSING INVESTMENT OUTLETS THAT ARE BEST SUITED TO HIS OBJECTIVES, RISK TOLERANCE, PREFERENCES AND EXPERIENCE. THE PROFILING PROCESS SHALL, AT THE MINIMUM, REQUIRE THE TRUSTEE TO OBTAIN CLIENT INFORMATION THROUGH THE CLIENT SUITABILITY ASSESSMENT (CSA) FORM, CLASSIFY THE CLIENT ACCORDING TO HIS FINANCIAL SOPHISTICATION AND COMMUNICATE THE CSA RESULTS TO THE SUBJECT CLIENT. THE GENERAL PRINCIPLES ON CSA SHALL ALSO REQUIRE THE TRUSTEE TO ADOPT A NOTICE MECHANISM WHEREBY CLIENTS ARE ADVISED AND/OR REMINDED OF THE EXPLICIT REQUIREMENT TO NOTIFY THE TRUSTEE OR ITS UIT FUND MARKETING PERSONNEL OF ANY CHANGE IN THEIR CHARACTERISTICS, PREFERENCES OR CIRCUMSTANCES TO ENABLE THE TRUSTEE TO UPDATE CLIENT'S PROFILE AT LEAST EVERY THREE (3) YEARS.
c) The participation is not a "deposit account" but a trust product; and that any loss/ income is for the account of the participant; that the trustee is not liable for losses UNLESS UPON WILLFUL DEFAULT, BAD FAITH OR GROSS NEGLIGENCE.
d) A BALANCED ASSESSMENT OF THE POSSIBLE GAINS AND LOSSES OF THE UIT FUND AND THAT the participation does not carry any guaranteed rate of return, and is not insured by the PDIC.
e) AN ADVISORY THAT THE INVESTOR MUST READ THE COMPLETE DETAILS OF THE FUND IN THE PLAN RULES, MAKE HIS/HER OWN RISK ASSESSMENT, AND WHEN NECESSARY, HE/SHE MUST SEEK INDEPENDENT/PROFESSIONAL OPINION, BEFORE MAKING AN INVESTMENT.
(2) Evidence of participation. Every UIT Fund participant shall be given -
(a) A participating trust agreement Such agreement shall clearly indicate that (1) THE UIT FUND IS A TRUST PRODUCT AND NOT A DEPOSIT ACCOUNT OR AN OBLIGATION OF, GUARANTEED, OR INSURED BY THE TRUST ENTITY OR ITS AFFILIATES OR SUBSIDIARIES; (2) THE UIT FUND IS NOT INSURED OR GOVERNED BY THE PDIC; (3) DUE TO THE NATURE OF THE INVESTMENT YIELDS AND POTENTIAL YIELDS CANNOT BE GUARANTEED; (4) ANY LOSS/INCOME ARISING FROM MARKET FLUCTUATIONS AND PRICE VOLATILITY OF THE SECURITIES HELD BY THE UIT FUND, EVEN IF INVESTED IN GOVERNMENT SECURITIES, IS FOR THE ACCOUNT OF THE CLIENT/ PARTICIPANT; (5) AS SUCH, THE UNITS OF PARTICIPATION OF THE INVESTOR IN THE UIT FUND, WHEN REDEEMED, MAY BE WORTH MORE OR BE WORTH LESS THAN HIS/HER INITIAL INVESTMENT/CONTRIBUTIONS; (6) HISTORICAL PERFORMANCE, WHEN PRESENTED, IS PURELY FOR REFERENCE PURPOSES AND IS NOT A GUARANTEE OF SIMILAR FUTURE RESULT; AND (7) the trustee is not liable for losses unless upon Willful default. BAD FAITH OR GROSS NEGLIGENCE.
IN ADDITION TO THE AGREEMENT, EVERY UIT FUND PARTICIPANT SHALL PROVIDED WITH -
(1) CLIENT SUITABILITY ASSESSMENT FORM TO BE ACCOMPLISHED DURING THE PROFILING PROCESS REQUIRED UNDER THE GENERAL PRINCIPLES ON CSA. THIS IS DESIGNED TO ENSURE THAT BASED ON RELEVANT INFORMATION ABOUT THE CLIENT. HIS INVESTMENT PROFILE IS MATCHED AGAINST THE INVESTMENT PARAMETERS OF THE UIT FUND. AT THE MINIMUM, CLIENT INFORMATION SHALL INCLUDE PERSONAL OR INSTITUTIONAL DATA, INVESTMENT OBJECTIVE, INVESTMENT HORIZON, INVESTMENT EXPERIENCE, AND RISK TOLERANCE; AND
(2) RISK DISCLOSURE STATEMENT, WHICH IN REFERENCE TO SUBSECTION X410.6.C/ 4410Q.6.C, SHALL DESCRIBE THE ATTENDANT GENERAL AND SPECIFIC RISKS THAT MAY ARISE FROM INVESTING IN THE UIT FUND. SUCH STATEMENT SHALL BE SUBSTANTIALLY IN THE FORM HERETO ATTACHED AS APPENDIX B
*.
BOTH DOCUMENTS SHALL BE SIGNED BY THE CLIENT/PARTICIPANT AND THE UIT MARKETING PERSONNEL WHO ASSESSED AND EXPLAINED TO THE CONCERNED CLIENT HIS/HER ABILITY TO BEAR THE RISKS AND POTENTIAL LOSSES.
(b) A confirmation of participation and redemption made to/from the Fund that shall contain the following information:
(i) NAVPU of the fund on day of purchase/redemption;
(ii) Number of units purchased/redeemed; and
(iii) Absolute peso or foreign currency value
No indicative rates of return shall be provided in the trust participating agreement. Marketing materials may present relevant historical performance purely for reference and with clear indication that past results do not guarantee similar future results.
(3) A participating trust agreement or confirmation of contribution/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 the implementing rules and regulations of R.A. No. 8792, otherwise known as the Electronic Commerce Act
c. Regular publication/computation/availability of the fund's NAVPu Trust Entities managing a UIT Fund shall cause at least the weekly publication of the NAVPu of such fund in one or more newspaper of national circulation: Provided, That a pooled weekly publication of such NAVPu shall be considered as substantial compliance with this requirement. The said publication, at the minimum, shall clearly state the name of the fund, its general classification, the fund's NAVPu and the moving return on investment (ROI) of the fund on a year-to-date (YTD) and year-on-year (YOY) basis.
NAVPu shall be computed daily and shall be made available to participants and prospective participants upon request.
d. Marketing Personnel.To ensure the competence and integrity of all duly designated UIT marketing personnel, all personnel involved in the sales of these funds shall be required to undergo standardized training program in accordance with the guidelines of this Circular. This training program may be conducted by their respective Trust Entities in accordance with the minimum training program guidelines provided by the Trust Officers Association of the Philippines ('TOAP'). Such training program shall however be regularly validated by TOAP."
SECTION 3. This Circular shall take effect fifteen (15) days following its publication either in the Official Gazette or in a newspaper of general circulation.
Adopted: 8 Jan. 2008
FOR THE MONETARY BOARD:
(SGD.) AMANDO M. TETANGCO, JR.
Governor
* Text Available at Office of the National Administrative Register, U.P. Law Complex, Diliman Quezon City
1 Example: "Fixed income securities" does not really mean a guarantee of fixed earning on the investor's participation; "Risk free" government securities which may be sovereign "risk-free" but not interest rate "risk-free"
