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Sunday, October 5, 2008

There's hope even for your unit trust

KUALA LUMPUR: Unit trust fund holders can still get their money back in the event of a bank failure because their money is held separately by a trustee.
The amount would depend on the performance of their fund in the market -- be it a profit or loss.

"It's not a problem at all," said Federation of Malaysian Unit Trust Managers council member Cheah Chuan Lok.

"They can get back the money even if their fund manager, or what we call counter-party, goes bust.

"The beauty of unit trust is that the fund managers don't have control of the money. They only direct the investment for their clients."

Each fund will have its own trustee, so the trustee custodies the assets.

The prospectus of each unit trust fund would spell out which trustee is responsible for the fund, which is a different bank.

For example, he said, the money collected from investors in AmFund would not be given to AmTrustee.

"So if AmFund goes bust, none of the money would be with us -- it'd be with our trustee, HSBC Trustee.

"And even if HSBC Bank fails, HSBC Trustee's money is ring-fenced in the sense that it's here in Malaysia and it is set aside as clients' money and has nothing to do with HSBC at all."

The trustee's job is to call for a meeting with the fund investors to ask them what they want to do with their money -- either find a new fund manager or return the money to them.

"That's their job. If they don't do it and if the unit holder has sent notices to them and if there's a further loss because of the trustee's delay in calling for a meeting, then the unit holder can sue the trustee for negligence.

"So it'd be silly to drag it out. They would call for the meeting within a reasonable amount of time."

The unit holder can also bring the matter to the attention of the Securities Commission, as unit trusts are under its purview.(NST/5 Oct 08)
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