|1.||What are the SC’s expectations in relation to the 11 core principles?|
|Examples of the SC’s expectations (non-exhaustive) are as follows:
|2.||What constitutes a compliance programme as stipulated in paragraph 4.04(g)?|
|A compliance programme should comprise a comprehensive review plan that captures the following:
|3.||What are the examples of necessary information required of the client as stated in paragraph 4.04(l)(i)?
|Before implementing an investment policy or recommending an investment product to a client, a compliance officer must confirm that there is proper documentation to support that the client has the-
|4.||What is considered as ‘delegating’ stated in paragraph 5.16 of the guidelines?|
|‘Delegating’ is primarily associated with the core activities of a fund management company. Where the management of a portfolio i.e. investment decisions are delegated to another fund management company, the CMSRL holder must continue to perform the role of marketing, soliciting, advising, reporting and interacting with the clients on performance of mandates.
In addition, it is incumbent for the principal fund management company to evaluate the conduct and performance of the delegate and ensure that such delegation is meeting the requirement of the clients.
|5.||Does a fund management company need to obtain the SC’s approval before delegating its fund management function to another fund management company?|
|No. However, a fund management company must provide a written notification to the SC, at least one month before the delegation arrangement takes place. Such notification would include the following details:
For fund management companies with an existing delegation arrangement, the information as stated in (i) to (iv) would need to be disclosed in the upcoming regulatory semi-annual filing to the SC.
Subsequent material changes to the delegation arrangement that will have an impact to the clients’ interests e.g. termination of delegation arrangement, has to be notified to the SC as soon as practicable.
|6.||Can there be a delegation of fund management function where a unit trust fund invests into a ‘feeder fund’?|
|No. The management of portfolio of the feeder fund is not deemed as a delegation by the licensed fund management company.|
|7.||If a fund management company has delegated its fund management function to another fund management company, who is held accountable to the clients?|
|The fund management company appointed by its client remains responsible for all obligations to its clients. It must continue to ensure compliance with requirements of these Guidelines.|
|8.||Are spouse and children of directors, investment committee members and employees required to disclose their interests and securities holdings to the fund management company?|
|Yes, if they have an interest and are holding the securities on behalf of the directors, investment committee members and employees, and such interest or holding will cause a conflict of interest to the client(s) of the fund management company. As a best practice, the compliance officer should obtain declaration of interests and securities holdings from the spouses and children of the directors, investment committee members and employees to ascertain whether there are conflicts of interest arising from such interests or holdings.|
|9.||What must a director disclose to the fund management company as mentioned in paragraph 6.06?|
|The disclosure requirement in paragraph 6.06 covers any interests or holdings that the directors own locally and abroad. It also applies to both local and foreign directors.|
|10.||What are the examples of soft commissions referred to in paragraph 6.16 that a fund management company cannot receive?|
|Examples of expenses that are not considered as part of soft commission include:
Additionally, the practice of accepting reimbursement on the soft commission paid in advance by the fund management company is construed as receiving rebates and would require the fund management company to direct the amount to the clients’ accounts accordingly.
|11.||Can a fund management company use different valuation bases for different clients in performing the valuation of clients’ portfolio as stated in paragraph 7.02?|
|Yes, provided that clients have agreed to the valuation basis and it is documented in the investment management agreement (IMA).|
|12.||What are examples of statement that are deemed ‘unfair and inaccurate’ with respect to paragraph 8.03?|
|Examples of statement that are deemed ‘unfair and inaccurate’ are as follows:
|13.||Based on paragraph 8.07, can a unit trust management company that is also licensed to carry out the regulated activity of fund management make statements on the future investment performance of its unit trust funds?|
|No. Disclosure requirements for products are subject to the relevant product guidelines and based on the current framework, statement of investment performance should only comprise past performance instead of future performance.|
|14.||What kind of process ought to be in place in determining the general and specific risks of any investment products as stated in paragraph 9.02(d)?|
|In determining the general and specific investment risks, a fund management company has to assess the risk in accordance to the different types of investment products.
The risk assessment has to be performed in an on-going manner, and must be structured based on the nature of the product, structure of the underlying asset (if any) and how it fits with the client’s mandate. Any changes identified following the risk assessment process, which may affect the client’s capital and earning, should be reported to the client as stipulated in paragraph 7.04(b).
|15.||What are defined as alternative products?|
|Alternative products are products that are-
|16.||Can a fund management company invest in alternative products?|
|Any investments in alternative products should be guided by the requirements stipulated in the Licensing Handbook.|
|17.||What should a fund management company do if it has invested in alternative products or products with SPV arrangement?|
|If a fund management company has invested into alternative products, the fund management company has to undertake an assessment on whether the client has been provided with sufficient information of the investment as required in paragraph 9.02(b) and risks involved as specified under 9.02(d). If the assessment reveals that the information given to the client does not conform to the requirement stated in 9.02(b) and (d), a fund management company has to immediately provide the client with the necessary information in writing.
If clients’ investments are pooled under an SPV or similar structure, a fund management company has to regularise the arrangement in accordance to Guidelines on Wholesale Funds as soon as practicable.
|18.||What is the expectation in respect of requirement stipulated in paragraph 9.02(f)?|
|Prior to implementing the client’s investment policy or recommendation, the fund management company is expected to have proper arrangements in place to ensure that there is continuous flow of investment information for monitoring purposes. The manner of arrangement is left to the discretion of the fund management company.|
|19.||Is the fund management company required to change the existing IMA to reflect current requirements stated in paragraph 9.11?|
|No. This requirement does not have a retrospective effect as long as the existing IMA does not have any provision that is contrary to the requirements of the guidelines, e.g. the IMA states that reporting to client is on bi-monthly basis but monthly reporting to client is required by the guidelines.|
|20.||Can a client withdraw from his portfolio voluntarily?|
|A client’s withdrawal is subject to conditions stated in the IMA as prescribed in paragraph 9.11(j).|
|21.||What is deemed as ‘best execution’ as stipulated in paragraph 9.18?|
|Best execution is when the transactions are done on the best available terms with consideration of the order size as well as relevant market conditions at the time of transactions.|
|22.||In paragraph 9.20, is the 50% limit of total dealings based on fund management company’s level or mandate level and does it cover only equities?|
|The 50% limit of total dealings in value in any one financial year is based at the fund management company’s level and should cover equities and fixed income transactions.|
|23.||What are examples of client identification documents stipulated in paragraph 10.09 (d)?|
|Examples of documents include extract of IMA, letter or board resolution from the client for opening of account or any other documentation which substantiate authorisation from the client for opening of account with the fund management company.|
|24.||What is the expectation in respect of requirement stipulated in paragraph 10.11 (a)?|
|A custodian is expected to maintain records of all clients’ assets on segregated basis, including assets which are held with a financial institution or authorised depository.
For example, a client has RM10 million in the trust account maintained with the custodian. The fund management company subsequently invest RM2 million into Zero-coupon Negotiable Instruments of Deposit (“ZNID”) issued by financial institution A.
The custodian is expected to maintain records of client’s portfolio/assets totalling RM10 million, i.e including the RM2 million ZNID with financial institution A.
|25.||Under what circumstances should a custodian provide a notification to the fund manager’s clients as stated in paragraph 10.11 (d)?|
|The custodian is required to notify the fund management company’s clients, when there is an instruction from the fund management company to-
|26.||What is the naming convention requirement for trust accounts?|
|The naming convention should be in accordance to the manner stipulated in paragraph 10.13. For example:
For account maintained under an omnibus structure, the naming convention should be in accordance to the manner as stipulated in paragraph 10.14 (b). For example:
|27.||What are the examples of third parties as prescribed in paragraph 12.02 with which a fund management company has to reconcile its records?|
|Examples of third parties include depositories, banks, custodians, counter-parties or dealers.|
|28.||What is deemed as ‘comprehensive records of clients’ accounts and transactions’ as stipulated in paragraph 12.03(b)?|
|The funds received from a client, investments and all the credits to the account of the client must be properly accounted for by the fund management company and details thereof must be reflected in the client’s account.|
|29.||What other anti-money laundering regulations are a fund management company required to comply with?|
|A fund management company must comply with the provisions stated in the Anti-Money Laundering and Anti-Terrorist Financing Act 2001 as well as the Guidelines on Prevention of Money Laundering and Terrorism Financing for Capital Market Intermediaries.|
|30.||What is required of a fund management company if it is unable to fulfil the requirements in the guidelines?|
|A fund management company is required to write to the SC on the following:
(Updated April 2012)