BSP widens distribution of trust funds

The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, expanded the distribution channels of trust corporations for unit investment trust funds to further develop the capital markets.

UITFs are ready-made investments that allow the pooling of funds from different investors with similar investment objectives. These funds are managed by professional managers and are invested in several financial instruments, such as money market securities, bonds and equities which offer higher return than traditional bank deposit products.

BSP Governor Benjamin Diokno said Wednesday the board approved the guidelines that allow trust corporations to distribute their UITFs through third parties, specifically individual and institutional agents.

Diokno said this was in support of the BSP’s advocacy to promote financial inclusion by broadening access points to innovative financial products and services.

“Through this policy, agents are expected to bring products closer to investors. At the same time, it is an opportunity for the industry to grow assets under management through partnerships with distributors,” he said.

“More products in the market will also bode well for capital market development,” Diokno said.

Trust corporations distribute UITFs through their main offices. The rules therefore provide other channels that may be used by trust corporations to offer their products.

Diokno said third-party providers should abide by stringent qualification standards to qualify as distributors.

Individual agents and employees of institutional agents are required to meet the qualifications for UITF marketing personnel in existing regulations while institutional agents should be reputable and duly licensed by appropriate regulatory agencies to distribute financial products.

The provisions in the forthcoming policy are anchored on the governance mechanisms and due diligence requirements under the existing outsourcing framework for BSP-supervised institutions.

“These ensure that TCs [trust corporations] will only tap entities that have a sound understanding of UITFs and are well-regulated and have the necessary infrastructure to distribute UITFs,” Diokno said.

He said this development was part of the set of reforms being undertaken by the Bangko Sentral to promote the growth of the trust industry.

The BSP is set to revamp the regulatory framework for trust, investment management and other fiduciary accounts by clearly laying out the expectations for the different activities performed by trust entities and streamlining regulatory requirements.