SEC to issue rules on UITFs

Heeding a petition from fund managers, the Securities and Exchange Commission will issue a new ruling that allows unit investment trust funds (UITFs) and similar trust entities to participate in securities deals that are open only to selected institutional investors.

In a recent interview, SEC Commissioner Ephyro Luis Amatong said the regulation would classify UITFs and similar trust entities as “qualified institutional buyers (QIBs).”

UITFs are professionally-managed collective investment vehicles. Unlike mutual funds, however, they are not incorporated and are only structured as a product of a trust corporation or a bank’s trust department.

Under the law, trust companies are classified as QIBs. “But UITFs are not trust companies so they fell within the gap,” Amatong said.

“That will give them access to QIB-only bond issuances,” he said.

QIBs are exempt from SEC registration requirement to purchase funds or securities locally or abroad. The assumption is they are familiar with their investments, thus, the seller of unregistered securities or funds would not need to register with the SEC.

While UITFs have been created a long time ago, its lack of recognition as QIB restricted them from certain investment opportunities enjoyed by other professionally-managed funds.

Amatong noted that one of the services created by the Philippine Dealing & Exchange Corp. (PDEx) was a QIB board.

“Thus, trading among QIBs will be facilitated by PDEx and trust entities can participate. UITFs can participate,” he said.

Entities classified as QIBs include banks, registered investment houses, insurance companies, pension funds or retirement plans maintained by the government or any political subdivision or are managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas.