3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS

The Layers of Rules

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The Capital Markets and Services Act 2007 (CMSA)

The CMSA sets out the regulatory requirements for Scheme Providers, schemes, Scheme Trustees, Employer Trustees and the PRS Administrator. The Private Pension Administrator (PPA) is the approved PRS Administrator and performs the duties prescribed in the CMSA.

Where the SC's powers sit in the Act:

Key CMSA requirements for UTS and/or PRS:

1. SC approval is needed to act as a Scheme Provider.
2. Money received from unit holders and PRS members is kept in trust accounts.
3. A UTMC must register a prospectus with the SC before it is issued.
4. PRS members' contributions vest as accrued benefits to which they are entitled.
5. PRS Providers must preserve members' accrued benefits.
6. Breaches may be offences punishable by fine and/or imprisonment, and the SC may direct compliance.
7. The SC may issue regulations and guidelines to flesh out the Act's general requirements.

Section 92A(1): information for investors

Section 92A(1) specifies the information a person investing in a scheme must receive: the key characteristics of the product, the obligations of the parties, the risks and the essential terms. Failure to comply can bring a fine of up to RM3 million, imprisonment of up to ten years, or both.

The PRS Regulations

Section 139ZI of the CMSA empowers the SC to make regulations on PRS, the PRS Administrator, PRS Providers, Scheme Trustees and Employer Trustees. The PRS Regulations took effect on 19 March 2012 and cover:

• registration and lodgement of the deed, disclosure document and Product Highlights Sheet (PHS);
• duties of the PRS Provider, Scheme Trustee and Employer Trustee;
• indemnity and replacement of a Scheme Trustee;
• the powers of the court in specific cases; and
• the register of members, rights relating to deceased members, members' meetings and prior SC approval to wind up a scheme.

SC Guidelines

The SC also issues Technical Notes and Practice Notes, some of which apply to schemes. Most rules apply to both UTS and PRS, but some apply to only one (the study guide's Diagram 3.2). The study guide appends a non-exhaustive list of laws and guidelines, and Consultants should watch the regulators' websites for changes.

FIMM's Rules

Extra Rules for IUTAs and IPRAs That Are Banks

IUTAs and IPRAs that are banks licensed by BNM must also follow:

1. BNM's Guidelines on Product Transparency and Disclosure, which aim to raise consumer awareness, make disclosure consistent so products can be compared, minimise mis-selling and promote informed decisions.
2. Guidelines on Investor Protection, issued jointly by BNM and the SC, which require among other things that SC and FIMM fit-and-proper, examination and continuing education standards are met; a register of employees doing capital market activities (and their securities) is kept; complaints are handled under BNM's complaints rules; and customers' money is safeguarded, the contractual relationship is clear and customers know where to seek redress.

Exam Pointers

• Part VI Division 5 = UTS; Part IIIA = PRS.
• s.92A penalty: RM3 million and/or ten years.
• s.139ZI = PRS Regulations (effective 19 March 2012).
• s.377 = basis for the UTF and PRS Guidelines.
• FIMM's practice question treats the CMSA, the Advertising Guidelines, the Prospectus Guidelines and the Licensing Handbook as all relevant to UTS and PRS.