BSP Approves Sale of Unit Investment Trust Funds via Third Parties

New rule amendments allow trust corporations to offer their investment products through third-party distributors, including individual and institutional agents.

The BSP (Bangko Sentral ng Pilipinas) has approved new guidelines that will allow trust corporations to distribute unit investment trust funds (UITFs) to investors through third-party channels.

Currently, trust corporations distribute UITFs only through their main offices. The rule amendments provide that they may offer their products through other channels including individual and institutional agents, provided that third-party distributors abide by stringent qualification standards.

“This initiative supports the BSP’s advocacy to promote financial inclusion by broadening access points to innovative financial products and services,” the BSP said in a statement.

Individual agents and employees of institutional agents are required to meet the existing qualification requirements for UITF marketing personnel, while institutional agents must be reputable and duly licensed by appropriate regulatory agencies to distribute financial products.

“Consistent with the expectation for the board and senior management to maintain an effective and efficient internal control framework, the trust corporation shall adopt appropriate control mechanisms to ensure the protection of client funds,” the BSP says.

The ultimate responsibility for KYC still lies with the trust corporations, though both individual and institutional agents can conduct client suitability assessments and customer identification and verification process on behalf of the trust corporation, subject to rules on outsourcing under existing AML/CFT rules.

The amendments are anchored on the governance mechanisms and due diligence requirements under the existing outsourcing framework for supervised institutions, the BSP says.

“Through this policy, agents are expected to bring products closer to investors,” said BSP governor Benjamin Diokno. “At the same time, it is an opportunity for the industry to grow assets under management through partnerships with distributors. More products in the market will also bode well for capital market development.”

The BSP’s circular on the amendments is available here.

The move is part of the set of reforms being undertaken by the BSP to promote the growth of the trust industry. The BSP also has plans to revamp the regulatory framework for trust, investment management and other fiduciary accounts.