20-02-2002: New SC guidelines on trustees for unit trust schemes
By Michelle Kuan, 7.11pm

The Securities Commission (SC) has come out with a set of guidelines on the appointment of trustees for unit trust schemes in situations where there may be conflicts of interests.

In a statement on Feb 20, it said the "Guidelines on Allowing A Person to be Appointed or to Act as a Trustee under Subsection 99(1) of the Securities Commission Act 1993" were aimed to provide checks and balances that would safeguard the interest of unit holders.

The guidelines are to facilitate applications by persons intending to be appointed or act as trustees of unit trust schemes.

Under the subsection of the Act, a person is not eligible to be appointed or to act as a trustee for unit holders without the approval of the SC if:

• the person is a shareholder who beneficially holds shares in the management company managing the unit trust scheme;
• is beneficially entitled to moneys owed by the management company; or
• is a related corporation of the management company; or
• any of the categories of persons referred to above.

The statement also said the guidelines contained provisions that include the requirement that at least one-third of the board of the trustee seeking approval comprise independent members; and there being no common directors sitting on both the boards of the trustee and the management company.
 
The guidelines also require a legal and structural separation between the trustee and the persons set out in subsection 99(1).

Another requirement is the independence of financial and non-financial resources between the trustee seeking approval and the persons referred to in subsection 99(1).

"Under the guidelines, the potential trustee for the unit trust scheme and the management company must also provide an undertaking as to independence in the dealings of the scheme under trusteeship," it said.

The guidelines are available on the SC's official website at www.sc.com.my