Unit trusts are one of the most common ways Malaysians come across investing, often through a bank or an agent. This guide explains what a unit trust is, who regulates it, and how to check the people offering it.
What a unit trust is
A unit trust fund lets many investors pool their money in one fund. Each investor holds units in that fund.
Under the SC's Guidelines on Unit Trust Funds, a management company sets up the fund, issues or offers its units, and operates and administers it. The management company must act in the best interests of unit holders.
The fund's money is managed by a fund manager. The guidelines describe a fund manager as a holder of a Capital Markets Services Licence for fund management, or an equivalent foreign licence.
A trustee is also appointed. FIMM describes the trustee fee as the amount charged for safekeeping your investment.
The value of a unit is linked to the fund's net asset value (NAV) per unit. Under the SC's guidelines, units are dealt at either a forward price, which is the NAV per unit at the next valuation point, or a historical price. FIMM notes that the price of each unit is usually calculated the day after you invest.
Who regulates unit trusts in Malaysia
The Securities Commission Malaysia (SC) says it is the sole regulatory body for authorising unit trust funds. Anyone offering units in Malaysia must obtain the SC's authorisation for the fund.
The SC's approval is also needed for the appointment of the management company and the trustee. When it authorises a fund, the SC registers the fund's deed and prospectus.
The SC uses a disclosure-based approach. It focuses on compliance with its guidelines and securities laws, and on adequate disclosure in the prospectus. SC authorisation is not a comment on whether a fund will perform well.
The Federation of Investment Managers Malaysia (FIMM) is a self-regulatory organisation. It regulates the marketing and distribution of unit trust schemes and Private Retirement Schemes (PRS). Only consultants registered with FIMM are authorised to sell them.
Fees you will see in the documents
FIMM lists the usual charges: a sales charge, a redemption charge when you withdraw, a management fee, a trustee fee and, in some cases, a switching charge.
Under the SC's guidelines, a sales or repurchase charge must be allowed by the fund's deed and disclosed in the prospectus. The management company and trustee may only be paid through an annual fee charged to the fund.
Each fund has a prospectus and a shorter product highlights sheet. FIMM says both are available online for free and set out the fund's objectives, strategy, fees and risks.
How to check who is offering the unit trust
Check the management company. Search sc.com.my/investment-checker or the SC's list of licensed and registered persons.
Check the person selling to you. FIMM says you can verify a consultant's FIMM registration number at fimm.com.my/search. Physical authorisation cards have not been used since 1 January 2022.
Look up the SC Investor Alert List. The SC says this list is not exhaustive and only serves as a guide.
If something does not add up, you can contact the SC on +603 6204 8999 or lodge a complaint through sc.com.my.
SmartChecker shows register records and reviews for the companies it lists, but the SC and FIMM records are the final word.
Common questions
Is a unit trust the same as a fixed deposit? No. Your money buys units in a fund, and the value of each unit follows the fund's net asset value.
Is there a cooling-off period? FIMM says first-time investors with a management company have a cooling-off right of six business days, with refunds paid within ten calendar days. Some people, such as the company's own staff, are not covered.
Does SC authorisation mean a fund is a good investment? No. The SC's approach is disclosure-based, so it checks compliance and disclosure rather than judging the fund's prospects.
Can anyone sell unit trusts? No. FIMM says only consultants registered with FIMM are authorised to sell unit trust schemes and PRS.