Under the FIMM Code of Ethics, how are gifts to entice investors treated?

Discouraged but not prohibited. The Code discourages incentives such as gifts but does not prohibit them, as long as they do not distract an investor from making an informed investment decision. Cash discounts or rebates, however, are prohibited.

A client asks a Consultant to transfer her investment money into the Consultant's personal account because it is faster. What should the Consultant do?

Refuse, because investors may only pay into the Distributor's account. The Code prohibits Distributors and Consultants from allowing investors to transfer money or issue cheques to any account other than the Distributor's account.

What does the FIMM Code mean by churning?

Executing excessive redemptions and purchases using the same investment proceeds. The Code defines churning as executing excessive redemption and purchase of schemes using the same investment proceeds into one or more funds, which is prohibited under the professionalism principle.

Core Principle 2: Professionalism — Free Study Guide 2026

The Required Conduct

Core Principle 2 asks for high standards of professionalism and due care, skill and diligence. The Code's required conduct includes:

Duty	Who	Detail
Service	Distributor and Consultant	Prompt, efficient and continuous service; treat investors with respect
Suitability assessment	Distributor and Consultant	Before recommending any scheme, under securities laws and SC and FIMM guidelines
Statements	Distributor	Keep investors updated by sending statements of account regularly
Gifts	Distributor and Consultant	Discouraged as incentives; not prohibited, but must not distract investors from an informed decision
AML/CFT	Distributor and Consultant	Comply with the SC's guidelines on preventing money laundering and terrorism financing
Regulators	Distributor and Consultant	Deal with FIMM and other authorities openly and cooperatively
Switching	Distributor	Use all free switching options before charging switching fees, and tell investors about them
Nominee arrangements	Distributor	Distributorship arrangements must not undermine investors' rights; cheques under the nominee system must be in the Distributor's name with the investor's identifying details on the back, matched to the application
Records	Distributor	Systems to identify, verify and document transactions, and keep personal data accurate (including current addresses)
Complaints	Distributor	Fair, efficient handling; records; resources; tell investors how to complain and about redress for monetary loss; quarterly complaint reports to FIMM or the SC; prompt notice to FIMM of serious complaints; keep complaint details confidential
Supervision	Distributor	Monitor Consultants' compliance, explain rules and train them
Pay	Distributor	Pay Consultants' commissions directly into the Consultant's own account, never through a third party
Change of Consultant	Distributor	Tell the investor in writing when the servicing Consultant changes
One Principal	Consultant	Represent only one Principal for UTS or PRS at a time
Product range	Consultant	Market only schemes distributed by his Distributor
Proof of registration	Consultant	Show proof of FIMM registration in the manner FIMM specifies

The Prohibited Conduct

For Distributors and Consultants (Code paragraph 4.3)

Using deceptive, misleading, unfair or aggressive methods to recruit Consultants.
Submitting a transaction for an investor without a valid instrument.
Accepting cash or cash deposits from investors.
Aggressive and offensive sales practices.
Letting investors pay into any account other than the Distributor's account.
Requesting, accepting or submitting pre-signed or pre-thumbprinted forms.
Letting a non-registered person market or distribute schemes.
Giving statements that create confusion or misunderstanding.
Giving investors a cash discount or cash rebate.
Churning: excessive redemptions and purchases using the same investment proceeds.
Using advertising that breaches the SC's Advertising Guidelines.
Negative or unwarranted statements that harm investors or the reputation of the industry, FIMM or the SC.
Encouraging investors to invest through loan financing.
Using FIMM's logo without written consent, except to show membership or registration.

Note

The cash ban does not apply to financial institutions that are "registered persons" under item (1)(g), Part 1 of Schedule 4 of the CMSA (banks acting as Distributors); they may accept cash subject to FIMM's additional controls (Code paragraph 4.3A).

For Consultants only (Code paragraph 4.4)

Impersonating or using the identity of another Consultant.
Assigning or allocating sales to another Consultant.
Using advertising and promotional material not provided or approved by the Distributor.
Using any valuation method other than the Distributor's to monitor or report on an investor's holdings.
Making an investment decision on behalf of the investor.
Agreeing to charge or receive from an investor any fee not disclosed in the prospectus, disclosure document or PHS.

Applying the Principle

Scenario	Ruling
A client hands a Consultant RM5,000 in cash at a café "to save a trip to the bank"	Prohibited: accepting cash (unless the Distributor is a bank registered person handling it under FIMM controls)
A client asks the Consultant to keep signed blank forms "for future top-ups"	Prohibited: pre-signed forms
A Consultant gives a client RM200 cash back from his commission	Prohibited: cash rebate
A Consultant gives new investors a branded umbrella at an event	Allowed but discouraged; must not distract from an informed decision
A team leader books a junior Consultant's sale under his own name	Prohibited: allocating or assigning sales
A Consultant switches a client between funds every month using the same money	Prohibited: churning

Exam Tips

Gifts: discouraged, not prohibited. Cash rebates: prohibited.
Payment: only to the Distributor's account, never to the Consultant.
Suitability comes before any recommendation.
The Consultant must never take the investment decision for the client.

FIMM Combined Examination

5.3 Core Principle 2: Professionalism

Key Takeaways