Byline: LEE C. CHIPONGIAN

After the panic and losses suffered by investors, it has been suggested that the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission review the blueprint of the reserved-free unit investment trust funds and settle the old question: who are the regulators

"It's something to look at," said SEC ChairpersonFe Barin. "Right now UITFs are covered by a BSP circular (Circular 447) but if there is reason for us to look into it, then why not."

BSP Deputy Governor Nestor A. Espenilla Jr. confirmed talks of giving up or transferring UITF regulations to the SEC. This is now being discussed under the proposed Revised Investment Companies Act.

"We need to study that carefully," he explained. UITF is a trust and placed under the responsibility of the banking industry. "We may be open to it (transferring regulation to the SEC) but it may not be legally possible."

In 2004, at the time that the BSP was preparing the circular, some officials from the SEC was questioning why the central bank was assuming authority over UITFs, which replaced common trust funds. CTFs originated from mutual funds, governed by the SEC and established under the 1960 Investment Company Act.

In the US and Europe, unit investment trusts are regulated by the SEC however in the Philippines, these are under the watch of the BSP. Under local laws, trust entities are with the banking sector and as such, regulated by the central bank. (Cont'd on page B-3)

The issue on UITF regulation is similar to the preneed issue, when both the BSP and SEC were in confusion on which agency should be regulating these products. The BSP and the SEC had been revisiting previous agreements to plug the regulatory gap in the pre-need sector. They have agreed to align regulations to improve the monitoring of trustee banks and pre-need companies.

It should be the same with UITFs, which originated from the mutual funds.

According to Barin, UITFs are similar but technically different from mutual funds. "They might appear the same but technically, they are different. They look alike but are not the same (products)."

The BSP said it would go back to the basics in trying to explain, again, what the UITFs are, its risks and what investors should expect after buying the product.

BSP Governor Amando M. Tetangco Jr. said they would have to explain the policy to banks and investors, what the UITF circular contained and the developments in the international market during the period.

At least two senators, Edgardo Angara and Sergio Osmena III, are pushing for an investigation to determine why banks did not properly explain to investors the risks involved in buying UITFs, which has amounted to more than P300 billion.

Tetangco said the central bank will explain the UITFs however so far, his office has not received any formal requests or queries from the senate or other branches of government. "We can explain what UITFs are and why banks are allowed to issue UITFs," he said.

The BSP earlier warned that UITFs are not protected products and investors can lose the investment principals.

The central bank has been asked to review the circular. But Tetangco assures the public that the trust product is designed based on international best practices.