1) What is the difference between paragraph 2.0 (1) and 2.0 (2) of Schedule C, Appendix I of the Guidelines on Unit Trust Funds (Guidelines)?
Paragraph 2.0(1) of Schedule C, Appendix I of the Guidelines refers to share capital of an issuer, whilst paragraph 2.0(2) of Schedule C, Appendix I of the Guidelines refers to all securities of an issuer, including shares. For example, holding in ABC stock only would fall under paragraph 2.0(1) of Schedule C, Appendix I of the Guidelines. However, holding of ABC stocks, ABC bonds and ABC warrants are subjected to paragraph 2.0(2) of Schedule C, Appendix I of the Guidelines as well.
2) Clarification on Clause 10.10(1) of the Guidelines on Unit Trust Funds (Guidelines)
The 5% allowance as stated in the clause is only intended for the limits or restrictions as imposed by Schedule C, Appendix I (Non-Specialized Funds) of the Guidelines. This allowance is not meant for asset allocation.
3) Does the definition of liquid assets in the Guidelines on Unit Trust Funds (Guidelines) also include all receivables and payables?
The definition of liquid assets in the Guidelines is intended to capture receivables provided that it is capable of being converted into cash within 7 days. However, payables are liabilities and thus cannot be classified as liquid assets. For the purpose of reporting in the monthly UTF returns, generally, liquid assets comprise cash and money market instruments. Receivables are classified under “other assets”.
4) Is the breach of Clause 11.09 (1) of the Guidelines on Unit Trust Funds (Guidelines) due to the non-availability of data or the absence of daily monitoring considered acceptable?
No. Compliance with Clause 11.09 (1) of the Guidelines is required at all times.
5) What are bonus units?
Bonus units, like bonus shares, can only be issued where the units are capitalized from reserves. Units given to unit holders at the expense of the unit trust management companies should be termed as free units / additional units. Units issued resulting in the reduction of net asset value (NAV) per unit should be termed as unit splits.
6) Procedure for Calculation and Collection of Management Fee Currently, the maximum rate for the collection of management fee is 1.5% p.a. of the net asset value (NAV) of the scheme. Random survey among industry participants revealed that whilst some accrued this fee only on Kuala Lumpur Stock Exchange (KLSE) trading days (approximately 252 days), others accrued in on whole calendar days (365 days) including weekends and public holidays. Would the latter be more appropriate as it reflects the operating structure of the management company (i.e. need for salary payment, rentals, computer maintenance, etc.) including weekends & public holidays?
The industry should accrue the annual management fee and trustee fee by dividing the net asset value of the scheme by the number of days in a year using 365 days.
7) What type of transaction cost factor or expense allowance is allowed under Clause 11.02 (7) of the Guidelines on Unit Trust Funds?
Generally, such cost as stated in the deed. Examples of cost relating to acquisition of investments are brokerage fee, agent fee, stamp duty, transaction charges / tax, etc.
8) What type of material costs involved in the disposal of investments is allowed under Clause 11.03 (6) of the Guidelines on Unit Trust Funds (Guidelines)?
Clause 11.03 (6) of the Guidelines is intended to capture costs relating to disposal of investments. Examples of cost relating to disposal of investments are brokerage fee, agent fee, stamp duty, transaction charges / tax, etc.
9) To what extent amendments / insertions may be made to a prospectus or deed after the Securities Commission (SC) has issued the no further comment letter?
There should be no amendments or insertions at all after the SC has issued the no further comment letter for prospectus or deed.
10) The definition of group of companies in the Guidelines on Unit Trust Funds (Guidelines) means “any company and its related corporations”. How to categorize a company to be a related corporation?
The definition of “related corporation” in the Guidelines refers to the same interpretation in Section 6 of the Companies Act 1965, where a corporation is deemed to be related to each other when it:

  • is the holding company of another corporation;
  • is a subsidiary of another corporation; or
  • is a subsidiary of the holding corporation of another corporation,

that first-mentioned corporation and that other corporation shall be deemed to be related to each other.

11) Is there a need for an application form to be attached for regular investment plans?
Yes. Section 41 of the Securities Commission Act (SCA) 1993 states that the issue, offer for subscription or purchase of, or an invitation to subscribe for or purchase any securities requires a prospectus with an attached application form. Regular investment plans falls within the definition of making available of units and it is not an excluded offer or invitation as stipulated in Schedule 2 of the SCA 1993.
12) Does the definition of “securities” in Section 2 (Interpretation) of the Securities Commission Act (SCA) 1993 cover warrants?
Yes. The definition for ‘securities’ in the SCA 1993 and in the Securities Industry Act 1983 means, amongst others, debentures, stocks and shares in a public company or corporation, or bonds of any government, and includes any right or option in respect thereof and any interest in unit trust schemes.
13) What changes deemed material by the Securities Commission that would require the issuance of a supplementary prospectus?
Materiality depends on the facts of each case and is evaluated on a case-by-case basis. In evaluating materiality, the industry is advised to be guided by their legal adviser’s views.
14) Who can provide the independent verification for investment performance as required by Clause 4.13 of the Guidelines on Unit Trust Advertisements and Promotional Materials “….independently sourced or independently verified…. by a recognized financial and statistical reporting service”?
Companies can use any professional, independent, widely recognized and / or reputable party who has the required expertise.
15) Are the designated person in charge of compliance of management companies allowed to provide the independent verification for investment performance as required by Clause 4.13 of the Guidelines on Unit Trust Advertisements and Promotional Materials?
Verification from the designated person in charge of compliance is not considered as independently sourced as they are employees of the management companies / holding companies. As such, the designated person in charge of compliance may not be suitable in providing the independent verification for investment performance as required by Clause 4.13 of the Guidelines on Unit Trust Advertisements and Promotional Materials.
16) Are trustees considered qualified and independent of management companies to provide the independent verification as required by Clause 4.13 of the Guidelines on Unit Trust Advertisements and Promotional Materials?
For investment performance, trustees cannot be considered as an independent party. As such, Trustees may not be suitable in giving the required independent verification as required by Clause 4.13 of the Guidelines on Unit Trust Advertisements and Promotional Materials. However, Trustees are suitably qualified to verify figures which are generated or obtained internally from within the company such as net asset value, buying price, selling price, portfolio turnover ratio, etc.
17) Can the date of the Prospectus be omitted from the warning statement / disclaimer in promotional materials such as banners and posters?
No. Section 50(5)(b) of the Securities Commission Act 1993 requires that the date of the prospectus be specified.
18) Are management companies required to re-submit to the Securities Commission (SC) advertising and promotional materials which were first published as posters and duly submitted to the SC for post-vetting, if the same materials are subsequently published in the newspaper?
No. Clause 2.02 of the Guidelines on Unit Trust Advertisements and Promotional Materials requires the issuer to deliver to the SC one copy of the printed advert and/or promotional materials within 2 weeks from date of initial issuance or first publication. Printed advert and/or promotional material should only be re-submitted when changes have been made to the contents or layout subsequent to the initial issuance or first publication.
19) Is there a validity period after an individual has successfully passed Modules 9 and 10 “Licensing Examination for Fund Manager’s Representative” before he / she has to be appointed as a designated person in a unit trust management company?
The validity period is 2 years for new entrant/newcomers into the industry. New entrants/newcomers are those that are not in the employment of fund management industry. However, a 3 years grace period apply to those in employment when they sat for the exams but had subsequently left the industry after passing the exams. For existing employees of fund management, there is no expiration date for the validity period.
20) Should reference be made to Net Asset Value (NAV) when disclosing past distribution payments in advertisements and/or promotional material?
Distribution payments will have an effect on the NAV per unit of the fund. The use of past distribution payments should make reference to the impact on NAV per unit prior to and subsequent to the distribution. It is vital that unit holders are given complete and accurate representation of the impact of distribution payments to NAV per unit of the fund.