Unit Investment Trust Funds (UITFs) Overview

Unit Investment Trust Funds (UITFs)

• All sales personnel selling UITFs must complete standardized training per SEC Circular 447, subsection UX 410.7, led by trust entities adhering to TOAP minimum training guidelines.
• Clients must complete a Client Suitability Assessment (CSA) before investing in a UITF, assessing investment goals, risk tolerance, knowledge, and experience.
• Transparent communication is essential, including UITF investment objectives, structure (e.g., bond, equity funds), risk profile, and strategy.
• UITFs are not deposit products, offering no guaranteed returns or fixed rates; they are not covered by the PDIC.
• Trustees exclusively manage and control UITF investments, adhering to stated objectives and policies.
• Investment objectives and policies defining the fund's strategy must be disclosed to clients.
• UITFs use the mark-to-market valuation method; values fluctuate with the market, potentially resulting in losses on redemption even if underlying investments haven't been sold. Clients must understand this.
• Fees include administration, feeder/fund-of-funds (potentially higher), custody, and external audit fees.
• Trustees are not liable for losses unless due to fraud, bad faith, or gross negligence.
• UITF participants can request plan rules, lists of existing/prospective investments, and risk profiles..
• UITFs are annually audited by SEC-approved independent external auditors; results are available to participants.
• Amendments and fund terminations need trustee board approval; participants receive 30 days' notice to withdraw before changes, unless otherwise stated in plan rules.
• Taxation follows current Philippine tax laws.
• Clients are categorized as conservative, moderate, or progressive based on risk appetite and investment objectives.

Matching Clients with Suitable UITFs

• CLIENT FACTORS (SHOE):
  • S (Size): Client's investment capacity.
  • H (Horizon): Client's investment timeframe.
  • O (Objective): Client's investment goal (e.g., capital appreciation, preservation).
  • E (Experience): Client's investment history, risk tolerance, and profile.
• A Client Suitability Assessment Form, completed by clients before investing, helps sales personnel recommend suitable investments; the form should be updated regularly.

Declaration of Trust and Marketing Collateral

• The Declaration of Trust, outlining plan rules and approved by the trustee board, is submitted to the SEC for approval and publicly available at the trustee's office.
• Marketing materials for UITFs should include:
  • Fund name and classification
  • Investment objectives and policies
  • Risk disclosure
  • Administrative and marketing details (e.g., pricing, deadlines, fees)
  • Disclaimer that the investment is not a deposit and is not insured by the PDIC
  • Balanced evaluation of potential gains and losses.
  • Advice to conduct personal assessment and seek professional guidance.

Marketing Do's and Don'ts

• Do:
  • Thoroughly explain UITF details to clients.
  • Explicitly discuss potential risks.
  • Accurately profile clients for suitable fund selection.
  • Encourage clients to seek expert advice.
• Don't:
  • Represent the UITF as a deposit product.
  • Guarantee returns or profits.