BSP Introduces Differentiated Regulatory Approach on Trust and Other Fiduciary Business of Trust Entities

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 revised policy is consistent with the thrust of the BSP to adopt a differentiated regulatory approach based on the major business activities and investment mandate of trust entities particularly trust, advisory, advisory with execution and execution only mandates. This aims to improve operational efficiency and promote greater investor confidence in the financial markets.

The new rules expanding the investment outlets and streamlining the reportorial requirements for trust entities are complemented by enhanced disclosures and clearly defined expectations and operational requirements based on the investment mandate of the trust entity. The issuance likewise provides for the adoption of a disciplined investment strategy.

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 improved disclosure requirement is intended to better inform investors of the attendant risks associated with certain investments and engender greater sense of accountability for trust entities particularly when given discretion on the disposition of client's funds.

This policy issuance is the first of a series of major reform initiatives towards the full adoption of a differentiated regulatory approach on the 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.

Source: Bangko Sentral ng Pilipinas (BSP)

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