The Bangko Sentral ng Pilipinas (BSP) has given trust entities more latitude in managing the funds of clients but with higher standards to protect investors by amending regulations.
“The Monetary Board approved amendments to trust regulations that will provide trust entities greater flexibility in managing client’s portfolio premised on sound fund management practices and adherence to professional code of conduct and ethical standards,” the BSP said in a statement on Thursday.
The revision is consistent with a regulatory approach based on major business activities and investment mandate of trust entities, particularly trust, advisory, advisory with execution, and execution only mandates, the central bank said.
The amended rules aim to improve operational efficiency and promote greater investor confidence in financial markets, it said.
According to the central bank, the new rules expanded the investment outlets and streamlined the reporting requirements on trust entities, complemented by enhanced disclosures and clearly defined expectations and operational requirements based on the investment mandate of the trust entity.
It also requires trust entities to adopt a disciplined investment strategy, it added.
As the revised rules give trust entities more latitude in managing the funds of clients, higher standards are set in terms of managing the accounts and in protecting the interest of the investors, the central bank noted.
An improved disclosure requirement informs investors of the risks involved in certain investments, and engenders a greater sense of accountability on the part trust entities with discretion in handling the investment funds, it said.
This is the first in a series of major reform initiatives toward the full adoption of a differentiated regulatory approach on trust and other fiduciary business of trust entities.
“This approach significantly differs from the current regulatory framework which distinguishes by product classification but provides the same regulatory expectations regardless of risk and accountability assumed by trust entities,” the central bank said.