BSP issues rules on UITF

The Bangko Sentral ng Pilipinas (BSP) recently issued Circular 593, providing significant amendments to existing regulation Circular 447, governing unit investment trust funds (UITF).

An important amendment is the adoption by trust banks of a client suitability assessment (CSA) framework, which clients must undergo to help them assess their investment objectives, risk tolerance, investment preferences and experience.  The result of this assessment will help the trust marketing personnel determine which UITF best matches the client’s investment profile.

Another amendment adds a comprehensive risk disclosure in the UITF’s plan rules. This ensures that clients are aware of the various potential risks that may arise while investing in a UITF, including some risks specific to certain types of funds.

“UITF clients are made aware that various types of UITFs have varying degrees of risk-return parameters and that these should be matched with one’s own investment profile and preference, so that one’s expectations are met.” Ma. Lourdes T. de Vera, president of Trust Officers Association of the Philippines (TOAP), said.

The Declaration of trust executed by the investor should clearly indicate that  a UITF 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; the UITF is not insured or governed by the Philippine Deposit Insurance Corp. (PDIC); due to the nature of the investment, yields and potential yields cannot be 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 client/participant; as such, 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/contributions; historical performance, when presented, is purely for reference purposes and is not a guarantee of similar future result, and the trustee is not liable for losses unless upon willful default, bad faith or gross negligence.—TPT