1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators
Key Takeaways
FIMM's study guide lists the CIS participants as investors or unit holders, the Trustee, the Management Company, the regulators and the dispute-resolution body.
Unit holders cannot require the fund's assets to be transferred to them and are not liable to indemnify the manager or Trustee if liabilities exceed the fund's assets.
A Management Company may outsource investment management, fund accounting and the register of unit holders, but the ultimate responsibility stays with it under the UTF and PRS Guidelines.
The Trustee must be registered with the SC and protects investors by holding the fund's assets in its name and ensuring the Management Company follows the deed and offering documents.
The Financial Markets Ombudsman Service (FMOS) was established on 1 January 2025 by consolidating the Ombudsman for Financial Services and SIDREC.
The Ecosystem in One Picture
FIMM's practice question lists the participants as investors/unit holders, the Trustee, the Management Company, regulators and dispute resolution. A consumer association is not one of them.
Unit Holders
A unit holder is legally recognised as an investor in the fund. Unit holders can be individuals, companies, institutions, government bodies, charities, societies, associations, trusts and even other CIS.
Their rights are set out in the deed and the offering document:
| Scheme | Offering document |
|---|---|
| UTS | Prospectus |
| PRS | Disclosure document |
| Wholesale fund | Information memorandum |
If the offering document is not detailed enough, the unit holder can refer to the deed, usually by requesting a copy from the Management Company's registered office.
Rights include receiving distributions (if any), sharing in the capital value of units and any other rights in the deed. Limits on those rights:
- A unit holder cannot demand that fund assets be transferred to them.
- A unit holder cannot interfere with or question the Trustee when it exercises its rights as the registered owner of the fund's assets.
Liability is limited: a unit holder is not liable to indemnify the fund manager or Trustee if their liabilities exceed the value of the fund's assets.
The Management Company
The Management Company (a UTMC for UTS, a PRS Provider for PRS) establishes, offers, markets, operates and administers the scheme. Because it carries out regulated activities under the Capital Markets and Services Act 2007 (CMSA), it must be licensed by the SC.
It may outsource functions, but ultimate responsibility remains with the Management Company under the SC's UTF and PRS Guidelines. Commonly outsourced functions:
| Function | What is outsourced |
|---|---|
| Investment management | An external fund management company (domestic or foreign, licensed) handles stock selection, research and asset allocation |
| Fund accounting / administration | Valuing investments, computing NAV, preparing financial statements, dealing with auditors |
| Register of unit holders ("transfer agency") | Keeping unit holder records and recording subscriptions and redemptions |
FIMM's practice question tests the false statement "a Management Company must not outsource any of its functions".
The Trustee
The Trustee is an independent party that must be registered with the SC. It protects unit holders in two ways:
- Safeguarding assets – all fund assets are held in the Trustee's name on behalf of the fund.
- Monitoring the manager – it checks that the Management Company follows the deed and offering documents, carrying out independent reviews instead of relying only on what the manager reports.
A Trustee may appoint agents such as a custodian, and a custodian may appoint a sub-custodian (for example within its global group, or in countries where it has no presence). The arrangement must ensure fund assets are:
- clearly identified as the fund's assets;
- held separately from other assets held by the Trustee; and
- registered in the Trustee's name, or in the custodian's name to the order of the Trustee.
The Trustee remains responsible for the actions of any agent it appoints.
Distribution Channels
A Management Company may use its own sales team and other channels. For UTS and PRS these are the UTS agency force, IUTA, IPRA, CUTA and CPRA (Chapter 3 explains each). Choosing channels is a commercial decision for the Management Company, but it must ensure its channels comply with the rules.
Regulators and FIMM
- The SC is the primary regulator of CIS.
- BNM is involved for anti-money laundering, countering financing of terrorism and targeted financial sanctions, and for foreign exchange matters.
- Foreign regulators are involved when a CIS is offered under a passporting scheme (the ASEAN CIS framework) or a mutual recognition arrangement (for example Hong Kong or the Dubai International Financial Centre).
- FIMM is a self-regulatory organisation (SRO) mandated by the SC to oversee the marketing and distribution of UTS and PRS. It regulates UTMCs, PRS Providers, IUTAs, IPRAs, CUTAs, CPRAs and individual UTS and PRS Consultants.
Oversight Functions
The study guide's Table 1.4 adds an oversight function that checks the fund is managed according to its deed, prospectus, internal restrictions and the Guidelines. It can be an individual (who must be independent of the functions overseen) or a committee (which may include some non-independent members if it can still do its job). Nobody performing the oversight function may also be a member of the Shariah adviser for the same fund. If the manager does cross-trades between funds or client accounts, the oversight function must approve the cross-trade policy and receive details of each cross-trade.
Dispute Resolution: FMOS
The Financial Markets Ombudsman Service (FMOS) was established on 1 January 2025 by consolidating the Ombudsman for Financial Services (OFS) and the Securities Industry Dispute Resolution Center (SIDREC). It is appointed by BNM and the SC to resolve disputes between financial consumers and financial service providers independently, fairly and in a timely way, without taking sides and on the facts of each dispute.
Which statement about the rights of a unit holder is correct?
A unit holder is entitled to distributions declared and to share in the capital value of the units, but cannot demand transfer of fund assets
A unit holder can direct the Management Company on day-to-day portfolio decisions
A unit holder must indemnify the Trustee if the fund's liabilities exceed its assets
A unit holder may require the Trustee to transfer a proportional share of the fund's shares into the unit holder's name
A UTMC appoints an external fund management company to manage a fund's portfolio. Who remains ultimately responsible for the fund?
FIMM
The Trustee
The UTMC
The external fund management company
Which body was formed on 1 January 2025 by consolidating the Ombudsman for Financial Services and SIDREC?
The Securities Industry Development Corporation
The Investor Protection Fund
The Private Pension Administrator
The Financial Markets Ombudsman Service
Sections you finish are checked off in the contents.