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11.12.31
PART FOUR
TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT
MANAGEMENT ACTIVITIES
Section X401 Statement of Principles
The cardinal principle common to all trust
and other fiduciary relationships is fidelity.
Policies predicated upon this principle are
directed towards confidentiality, scrupulous
care, safety and prudent management of
property including reasonable probability
of income with proper accounting and
appropriate reporting thereon. Practices are
designed in accordance with the basic
standards for trust, other fiduciary and
investment management accounts in
Appendix 83 to promote efficiency in
administration and operation; to adhere and
conform to the terms of the instrument or
contract; and to maintain absolute
separation of property free from any
intrusion of conflict of interest.
A bank authorized to engage in trust
and fiduciary business is under no
obligation, either legal or moral, to accept
any such business being offered nor has it
the right to accept if the same is contrary to
law, rules, regulations, public order and
public policy. It shall advertise its services
in a dignified manner and enter such
business only when demand for such
service is evident, when specially
equipped to render such service and upon
full appreciation of the responsibilities
involved. It shall be ready and willing to
give full disclosure of the services being
offered and shall conduct its dealing with
transparency. Harmonious relationship
shall likewise be pursued with other
professions to achieve the common goal
of mutual service to the public and
protection of its interest.
Banks may not receive or hold as
trustee, agent, administrator, financial
manager, or other similar capacity, any
fund or money from the Government and
Part IV - Page 1
X403
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Part IV - Page 2
d. Trust is a relationship or an
arrangement whereby a person called a
trustee is appointed by a person called a
trustor to administer, hold and manage
funds and/or property of the trust or for the
benefit of a beneficiary.
e. Trust agreement is an instrument
in writing covering the terms and conditions
of the trust.
f. Trustee is any person who holds legal
title to the funds and/or property of a trust.
g. Trustor is any person who creates
a trust.
h. Beneficiary is any person for
whose benefit a trust is created.
i. Fiduciary shall refer to any person
or entity engaged in any of the other
fiduciary business as herein defined where
no trustor-trustee relation exists.
j. Agency shall refer to a contract
whereby a person binds himself to render
some service or to do something in
representation or on behalf of another, with
the consent or authority of the latter.
k. Principal shall refer to the person
who grants authority to another person
called an agent, under a contract to enter
into transactions in his behalf.
l. Agent shall refer to a person who
acts in representation or on behalf of
another with the latters authority.
m. Trust department shall refer to then
department, office, unit, group, division or
any aggrupation which carries out the trust
and other fiduciary business of a bank.
n. Trust officer shall refer to the
designated head or officer-in-charge of the
trust department.
o. Trust account shall refer to an
account where transactions arising from a
trusteeship are kept and recorded.
p. Common trust fund (CTF) shall
refer to a fund maintained by a bank
authorized to perform trust functions under
a written and formally established plan,
exclusively for the collective investment
and reinvestment of certain money
X403 - X404.2
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Part IV - Page 3
X404.2 - X404.3
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Part IV - Page 4
X404.3 - 2404
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Part IV - Page 5
2404
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Part IV - Page 6
2404 - 3404
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Part IV - Page 7
3404
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Part IV - Page 8
3404 - X405.2
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Part IV - Page 9
X405.2 - X405.4
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Part IV - Page 10
Third and
Trust
First
Second
Asset Size
subsequent
offense(s)
TBs/RBs with
Limited Trust
P300.00
P400.00
P500.00
P600.00
P700.00
P800.00
P1,000.00
P1,250.00
P1,500.00
P2,000.00
P3,000.00
P4,000.00
P5,000.00
P6,000.00
P7,000.00
P8,000.00
P9,000.00
P10,000.00
Authority
Up to
P500
million
Above
P500
million
but not
exceeding
P1 billion
Above
P1 billion
but not
exceeding
P10 billion
Above
P10 billion
but not
exceeding
P50 billion
Above
P50 billion
X405.4 - X405.5
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Under Circular 491 dated 12 July 2005, regular reserve and liquidity reserve rates shall be 10% and 11%, respectively,
effective the reserve week starting 15 July 2005.
2
Under MAB dated 29 December 2004, regular reserve and liquidity reserve rates shall be 6% and 2%, respectively,
effective the reserve week starting 07 January 2005.
1
Part IV - Page 11
X405.5 - X405.6
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1
Under Circular 491 dated 12 July 2005, regular reserve and liquidity reserve rates shall be 6% and 11%, respectively,
effective the reserve week starting 15 July 2005.
Part IV - Page 12
X405.6 - X405.9
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Part IV - Page 13
X405.9 - X406.2
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Part IV - Page 14
X406.2 - X406.4
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X406.4 Responsibilities of
administration
a. Board of Directors. The board of
directors is responsible for the proper
administration and management of trust and
other fiduciary business. Funds and
properties held in trust or in any fiduciary
capacity shall be administered with the skill,
care, prudence and diligence necessary
under the circumstances then prevailing that
a prudent man, acting in like capacity and
familiar with such matters, would exercise
in the conduct of an enterprise of like
character and with similar aims.
The responsibilities of the board of
directors shall include, but need not be
limited to, the following:
(1) It shall determine and formulate
general policies and guidelines on the:
(a) acceptance, termination, or closure of
trust and other fiduciary accounts;
(b) proper administration and management
of each trust and other fiduciary account;
and (c) investment, reinvestment and
disposition of funds or property held in its
capacity as trustee or fiduciary;
(2) It shall direct and review the
actions of the trust committee and all
officers and employees designated to
manage the trust and other fiduciary
accounts, especially accounts without
specific agreements on investments or
discretionary accounts;
(3) It shall approve or confirm the
acceptance, termination or closure of all
trust and other fiduciary accounts and shall
record such in its minutes;
Part IV - Page 15
X406.4 - X406.8
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Part IV - Page 16
X406.9 - X407
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Part IV - Page 17
X407 - X408
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Part IV - Page 18
X408 - X408.9
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X408.9 - X409.2
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Part IV - Page 19
X409.2 - X409.3
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Part IV - Page 20
X409.3 - X409.6
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X409.6 - X409.8
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Rate of Tax
5%
12%
20%
X409.8 - X409.9
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X409.9
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Original 6 months transitory period under Cir. 521 extended by another 6 months under Cir. 553
Part IV - Page 23
X409.10 - X409.16
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Part IV - Page 24
X409.16 - X409.17
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Part IV - Page 25
X409.17 - X410
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The regulations on common trust funds (CTFs) were relocated to Appendix 60. UIT Funds regulations took effect on
01 October 2004 (effectivity of Circular 447 dated 03 September 2004).
1
Part IV - Page 26
X410 - X410.5
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Part IV - Page 27
X410.6
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Part IV - Page 28
X410.6 - X410.7
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Part IV - Page 29
X410.7
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Example: "Fixed income securities" does not really mean a guarantee of fixed earnings on the investor's participation;
"Risk-free" government securities which may be sovereign "risk-free" but not interest rate "risk-free"
1
Part IV - Page 30
X410.7 - X410.8
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Part IV - Page 31
X410.8 - X410.11
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Part IV - Page 32
X410.11
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X410.12 - X411.1
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X410.12 Counterparties
a. Dealings with related interests/bank
proper/holding company/subsidiaries/
affiliates and related companies. A trustee
of a UIT Fund shall be transparent at all
times and maintain an audit trail for all
transactions with related parties or
entities. The trustee shall observe the
principle of best execution and no
purchase/sale shall be made with related
counterparties without considering at
least two (2) competitive quotes from
other sources.
b. Accreditation of counterparties.
The Fund shall only invest with approved
counterparties qualified in accordance with
the policy duly approved by the Trust
Committee. Counterparties shall be
subject to appropriate limits in accordance
with sound risk management principles.
X410.13 Foreign currencydenominated unit investment trust funds
UIT Fund denominated in any acceptable
foreign currency provided under existing
BSP rules and regulations may be
established. Such fund may only be
invested in allowable investments
denominated in pesos or any acceptable
foreign currency as expressly allowed
under the funds plan rules and properly
disclosed to fund participants.
X410.14 Exemptions from statutory
and liquidity reserves, single borrowers
limit, director, officers, stockholders and
their related interests. The provisions on
reserves, single borrowers limit and
DOSRI ceilings under Subsec. X405.5, and
Secs. X303, X330 and X331, respectively,
applicable to trust funds in general shall
not be made applicable to UIT Funds.
Sec. X411 Investment Management
Activities. The conduct of investment
management activities shall be subject to
the following regulations.
Part IV - Page 33
X411.1 - X411.5
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Part IV - Page 34
X411.5 - X411.8
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Part IV - Page 35
X411.8 - X411.10
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Part IV - Page 36
X411.10 - X412.2
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Rate of Tax
5%
12%
20%
Necessarily,
the
investment
management agreement shall clearly
indicate the date when the investment
manager actually received the funds which
shall serve as basis for determining the
holding period of the funds;
e. The investment manager may
accept additional funds for inclusion in
IMAs which have been established as taxexempt under R.A. No. 8424. However, the
receipt of additional funds shall be properly
documented by indicating that they are part
of existing tax-exempt IMAs and that the
interest income of the additional funds
derived from investments in interest-bearing
instruments shall be exempt from the
twenty percent (20%) final tax under the
same conditions mentioned in the preceding
item. The document shall also indicate the
Part IV - Page 37
X412.2 - X414.1
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Part IV - Page 38
X414.1 - X415.3
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Part IV - Page 39
X415.3 - X415.4
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Third and
Trust
First
Second
Asset Size
subsequent
offense(s)
TBs/RBs with
Limited Trust
P300.00
P400.00
P500.00
P600.00
P700.00
P800.00
P1,000.00
P1,250.00
P1,500.00
P2,000.00
P3,000.00
P4,000.00
P5,000.00
P6,000.00
P7,000.00
P8,000.00
P9,000.00
P10,000.00
Authority
Up to
P500
million
Above
P500
million
but not
exceeding
P1 billion
Above
P1 billion
but not
exceeding
P10 billion
Above
P10 billion
but not
exceeding
P50 billion
Above
P50 billion
Part IV - Page 40
X416 - X421
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Part IV - Page 41
X422 - X424
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Part IV - Page 42
X424 - X425.3
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Part IV - Page 43
X425.3 - X426.1
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Part IV - Page 44
X426.1 - X428
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Part IV - Page 45
X428 - X441.4
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Part IV - Page 46
X441.4 - X441.5
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Part IV - Page 47
X441.5 - X441.8
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Part IV - Page 48
X441.8 - X441.9
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a. Administration of securities
custodianship accounts of banks. 1
Securities custodianship accounts shall be
administered in the Trust Unit of a bank.
As an exception, however, a custodian
bank may be allowed to administer
custodianship accounts in the Bank Proper:
Provided, That this is limited to
custodianship accounts wherein the
securities custodian performs the basic
functions and responsibilities provided
under Subsec. X441.6: Provided, further,
That the custodian bank secures prior MB
approval on this arrangement: Provided,
finally, That a custodian bank that is
seeking exemption from the general
requirement should be able to demonstrate
that it has instituted adequate risk
management systems and prudential
controls in the Bank Proper to ensure the
protection of client assets, maintain
proper segregation of functions and
prevent conflict of interest situations that
may arise in the administration
of securities custodianship accounts
b. Accounting and recording for
securities. Custodians must employ
accounting and safekeeping procedures
that fully protect customer securities. It is
essential that custodians segregate
customer securities from one another and
from its proprietary holdings to protect the
same from the claims of its general
creditors.
Securities held under custodianship shall
be recorded in the books of the custodian
at the face value of said securities in the
off-balance sheet account Securities Held
Under Custodianship by Bank Proper, if
booked in the Bank Proper, or the other
fiduciary sub-account Custodianship, if
booked in the Trust Department.
Securities held under custodianship
where the custodian performs the
value-added service of securities
lending as agent shall be booked in the Trust
Department.
1
Existing BSP-accredited custodian banks which intend to administer their securities custodianship business in the bank
proper shall be given thirty (30) banking days from 01 April 2011 to comply with the provisions of this Subsection.
Part IV - Page 49
X441.9 - X441.13
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Part IV - Page 50
X441.13 - X499
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D. GENERAL PROVISION ON
SANCTIONS
Part IV - Page 51