THE BANGKO SENTRAL ng Pilipinas (BSP) has amended its rules on the periodic review of trust, investment management and other fiduciary accounts.

In a circular posted on its website, the BSP said the Monetary Board approved amendments to the Manuals of Regulations for Banks and Non-Bank Financial Institutions.

These amendments seek “to set the supervisory expectations on the conduct of periodic review of trust, investment management and other fiduciary accounts,” it said.

“A trust entity (TE) shall conduct periodic reviews of its trust, investment management, and other fiduciary accounts, hereinafter referred to as ‘accounts review,’ to ensure that the TE performs its fiduciary duties and responsibilities,” according to the circular.

The accounts review will include two types, namely the administrative and investment reviews.

The administrative review, which must be conducted once every three years, shall “ensure that accounts are being managed in accordance with their governing agreements; relevant laws, rules, and regulations; and applicable internal policies and procedures of the TE.”

Meanwhile, the investment review is conducted to ensure a client’s investment risks are properly managed and aligned with their risk profile, investment objectives, risk tolerance and liquidity needs, the BSP said. 

“Upon the conduct of an investment review, the TE should be able to determine whether certain portfolios/assets are no longer appropriate for an account and/or a change in the structure(s) or composition of the portfolio(s) is required, consistent with prudent investment practice.”

The investment review must also be set at least annually or more frequently depending on the nature of the account, it added.

The central bank said all accounts are required to undergo a review. However, there are alternative approaches in select cases.

“The review of trust and other fiduciary accounts where a TE exercises investment discretion and accounts that possess unique, unusual characteristics, are the subject of pending litigation, or contain a complex portfolio shall be conducted at the account level.”

“The account level review shall apply for both administrative and investment reviews,” it added.

Investment reviews of multiple accounts under a single client may be done at an aggregate level to account for the totality of the contractual relationships of the client with the TE, regardless of the mandate of the TE over accounts, the circular said, but noted that accounts vested with public interest may be subject to account level review.

“Homogeneous accounts or those that possess common characteristics based on the type of product or service, or the type of investment outlet… may be subject to collective administrative and/or investment review/s.”

Meanwhile, accounts of direct participants in unit investment trust funds may be excluded from the administrative and investment reviews.

“Regardless of the approach taken for an account, the TE shall ensure that its exercise of fiduciary duties is not undermined. The exclusion of an account from a review shall be done with proper bases,” the BSP said.

“In this regard, the TE shall implement effective operational procedures and controls to ensure that an account excluded from reviews is properly administered and invested in assets that are aligned with the client’s risk profile and investment objective.”

The circular also details the guidelines for the accounts review process, which requires a statement of purpose, approaches adopted for the conduct of the review and the scope of the administrative and investment reviews.

Under the administrative review, TEs will be assessed for the existence of an accurate, complete and current governing instrument as well as the extent and timeliness of their performance of the duties and responsibilities set out in the governing agreements and as required by regulatory bodies.

Meanwhile, the investment review will evaluate the suitability of the investment portfolio, propriety of asset allocation and promptness of deployment of funds, among other indicators. — Luisa Maria Jacinta C. Jocson