TOAP UITF Certification Program Qualifying Exam cheat sheet

A UITF is a collective investment scheme constituted under a trust agreement, administered by a trustee bank and marketed by an investment manager, with units representing proportionate beneficial ownership of the fund's pool of assets.

In the Philippines, UITFs are regulated by the Bangko Sentral ng Pilipinas under the Manual of Regulations for Banks (MORB) and the MORB-Trust/Other Fiduciary Business rules; the SEC regulates the investment manager where applicable.

A UITF must be approved by the BSP before launch; the trustee files the plan, target fund size, investment policy, and fee structure, and material amendments require prior BSP approval.

Each UITF must have a fund manager and a trustee with clearly separated duties: the trustee holds and safekeeps assets and computes NAVPU, while the investment manager makes investment decisions.

Minimum investment, minimum holding period, and early redemption penalties must be disclosed in the fund's plan and the Key Information and Investment Disclosure Statement (KIIDS).

UITFs are not deposit accounts and are not covered by PDIC insurance; the BSP requires this to be stated in marketing materials and client documents.

A UITF must be a single pool of assets with a single investment policy; a fund cannot be segmented into sub-pools with differing strategies under one unit class.

The trust fee is expressed as a percentage of net asset value, accrued daily and typically deducted from the fund before NAVPU is struck; it is not a sales load unless separately disclosed.

Eligible investments for a UITF are limited to those allowed by the BSP and the fund's own plan; typical holdings include government securities, bank deposits, corporate bonds, equities, and money market instruments.

A money market UITF holds instruments with remaining maturities of one year or less and targets low volatility; a bond UITF holds longer-duration fixed income and carries interest rate risk.

An equity UITF must hold at least 80% of net asset value in equities to qualify as an equity fund; a balanced fund mixes fixed income and equities per its declared allocation range.

A feeder UITF invests at least 90% of assets in a single target fund (often an offshore fund), and must disclose the target fund, its domicile, and the layered fees.

A fund-of-funds UITF invests in two or more collective investment schemes and must disclose the underlying funds and the aggregate fee load.

Currency risk arises in a UITF holding foreign-currency assets; hedged and unhedged unit classes must be separately described, and hedging costs reduce returns.

A UITF may not borrow for leverage, may not invest in real estate directly, and may not hold illiquid assets beyond limits set by the BSP and the fund plan.

Concentration limits, single-issuer limits, and related-party investment limits apply; breaches must be reported and corrected within the period allowed by the BSP.

NAVPU = (Total Assets − Total Liabilities) ÷ Total Number of Units Outstanding; the result is struck to a fixed number of decimal places per the fund plan.

Total assets are valued at fair value, not historical cost: equities at closing market price, fixed income at marked-to-market or amortized cost where allowed, and deposits at face plus accrued interest.

Accrued income, receivables, and payables (including accrued trust fees and taxes) are included in the NAV computation on an accrual basis.

Valuation must be done at least daily for funds that publish daily NAVPU; a fund may use a different frequency if disclosed in the plan and approved by the BSP.

Units are created when subscriptions are received and cancelled on redemption; the number of units issued is the subscription amount divided by the applicable NAVPU.

Subscriptions and redemptions are typically priced at the NAVPU of the next valuation point after receipt of a complete, cleared instruction (forward pricing), consistent with the fund plan.

Rounding and cut-off rules must be in the plan: amounts are rounded to the nearest centavo, and units to the stated decimal places, to keep NAVPU consistent across investors.

A material valuation error triggers a threshold-based correction and investor notification process; the fund plan and BSP rules set the threshold and remedy.

Suitability requires matching the fund's risk classification (conservative, moderate, aggressive) to the client's risk profile, investment horizon, liquidity needs, and objectives before any sale.

The risk profile must be documented in a client account record or risk assessment form signed by the client; an outdated profile should be refreshed at defined intervals or on material life changes.

Marketing materials must show the fund's investment objective, risks, fees, and the standard disclaimer that past performance does not guarantee future results.

Performance must be presented net of fees and on a comparable basis (same period, same valuation frequency); hypothetical or back-tested returns must be labeled as such.

No guarantee of principal or return may be made; agents may not use the words 'safe', 'guaranteed', or 'deposit-like' to describe a UITF.

Agents must have a current certification and be registered with the trustee or investment manager; unregistered persons may not solicit or accept subscriptions.

Sales load, if any, must be disclosed separately from the trust fee and reflected in the client's confirmation of subscription.

Cooling-off or cancellation rights, if offered, must be explained at the point of sale, along with the minimum holding period and early redemption charges.

The KIIDS is the primary pre-investment disclosure document; it must state the fund's objective, strategy, risks, fees, past performance, and the NAVPU history.

The KIIDS must be updated at least annually and whenever there is a material change to the fund; the client must receive the current version before subscribing.

Onboarding requires a completed account opening form, risk assessment, identification documents, and a signed acknowledgement of receipt of the KIIDS and trust agreement.

The trust agreement or participation agreement sets out the investor's rights, the trustee's powers, fee terms, and the procedure for redemption and termination of the fund.

Confirmations of subscription and redemption must show units issued or cancelled, the NAVPU used, the valuation date, and any fees charged.

Statements of account should be provided at least quarterly, showing units held, NAVPU, market value, and transactions during the period.

Records must be retained per BSP and AML rules: client identification and transaction records are generally kept for at least five years after the account is closed.

Advertisements and client communications must be fair and balanced and must not omit material risks; all marketing materials should be reviewed and approved before use.

The trustee must maintain a risk management framework covering market, credit, liquidity, and operational risk, with limits set in the fund plan and monitored by an independent risk or compliance function.

Liquidity risk is managed by matching redemption terms to asset liquidity, maintaining a cash buffer, and disclosing any redemption gates or suspension powers in the plan.

Under the Anti-Money Laundering Act, covered institutions must conduct customer due diligence, identify beneficial owners, and apply enhanced due diligence to politically exposed persons.

Suspicious transaction reports must be filed with the AMLC within the period prescribed by the rules, without tipping off the client; a covered transaction report is filed for transactions above the threshold.

A UITF must have a compliance officer and an internal audit program; breaches of investment limits and valuation errors are logged and escalated to the board or trust committee.

Conflicts of interest - such as investing fund assets in the trustee's own products or in related parties - must be disclosed and approved under the fund's policy.

Business continuity and outsourcing arrangements affecting NAVPU computation must be documented, tested, and subject to BSP notification where required.

Periodic regulatory reporting, including fund reports and audited financial statements, must be submitted to the BSP within the prescribed deadlines.

A trustee and investment manager owe a fiduciary duty to act solely in the best interest of unitholders, ahead of the firm's own revenue or cross-selling goals.

Client orders must be executed in the order received; front-running, pre-hedging, and preferential allocation of units at favorable NAVPU are prohibited.

Personal trading by fund staff in instruments held by the fund must follow a pre-clearance and blackout policy to prevent misuse of non-public information.

Compensation and incentives must not create pressure to recommend unsuitable funds; sales targets must be subordinate to suitability and disclosure obligations.

Material non-public information about the fund's holdings or pending NAVPU must not be disclosed to select clients; equal treatment of unitholders is required.

Fees and charges must be accurate, disclosed, and charged as described; undisclosed or excess charges are a breach of fiduciary duty and must be remedied.

Complaints must be logged, investigated, and resolved within a defined period, with escalation to compliance and a record kept for the regulator.

A conflict between the firm's proprietary positions and fund positions must be resolved in favor of the fund, and the resolution documented.