3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds

FIMM Combined Examination FCE

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1 Introduction: The FIMM Combined Examination (FCE)

0.1 FCE Exam Facts, Registration Rules and How to Use This Guide

2 Chapter 1: Understanding Collective Investment Schemes in Malaysia

1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified 1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History 1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators

3 Chapter 2: Introduction to UTS and PRS

2.1 UTS and PRS as Investments: Mechanics, Unit Calculations and How They Compare 2.2 Types of Funds: By Asset Class, Fund Structure and Investment Objective 2.3 Methods of Investing and Dollar Cost Averaging 2.4 Benefits and Disadvantages of Investing in UTS and PRS 2.5 Understanding Risk and the Risks of Investing in Schemes 2.6 Shariah-Compliant Schemes, Their Risks and the Role of the Shariah Advisory Council

4 Chapter 3: Regulatory Framework

3.1 The Regulatory Framework: The SC, Other Regulators and FIMM's Dual Role 3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS 3.3 Regulation of Scheme Providers and Oversight Functions 3.4 The Deed, the Prospectus or Disclosure Document, and the Product Highlights Sheet 3.5 Portfolio Constraints: Permitted Investments, Liquidity, Borrowing and Exposure Limits 3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds 3.7 Regulation and Duties of the Scheme Trustee 3.8 Regulation of Marketing and Distribution: Distributor Categories, Collection Points and Agency Structure 3.9 Registration of Consultants: Eligibility, Fit and Proper, Duration, Variation and Revocation

5 Chapter 4 (Part 1): Marketing and Distribution — Disclosure and Transactions

4.1 Servicing Investors and the Contents of the Prospectus and Disclosure Document 4.2 The Product Highlights Sheet, Advertising Standards and Account Maintenance 4.3 The Purchase Process and Suitability Assessment Before Personal Advice 4.4 Cooling-Off Rights, Repurchase of Units, Suspension and Switching 4.5 Financing the Purchase of UTS: Process, Safeguards and the Risk Disclosure Statement 4.6 EPF Transfers and Withdrawals for Investment in Approved Unit Trust Funds

6 Chapter 4 (Part 2): Marketing and Distribution — Distributions, Reporting and Service

4.7 Distributable Income, Distributions and NAV, "Buying" a Distribution and Taxation 4.8 Reporting to Investors: Confirmations, Statements, and Semi-Annual and Annual Reports 4.9 Marketing Principles, Delivering Quality Service and Handling Complaints 4.10 The Effect of Inflation, Taxation and Investment Costs on Returns 4.11 Investment Alternatives to UTS and PRS

7 Chapter 5: Code of Ethics

5.1 Compliance, Ethics and the Structure of the FIMM Code of Ethics 5.2 Core Principle 1: Honesty and Integrity 5.3 Core Principle 2: Professionalism 5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

8 Chapter 6: Personal Financial Planning

6.1 Personal Financial Planning: Definition, Features, Five Areas and the Six Steps 6.2 Financial Planner Credentials, Skills, Remuneration, and How a Planner Differs from a Consultant 6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle

9 Chapter 7A: Features and Operations of UTS

7A.1 Structure of a UTS, the Trust Deed, the Parties and Modifying the Deed 7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio 7A.3 Dealing in Units, Valuation, NAV Calculation and Unit Prices 7A.4 Forward and Historical Pricing, and the UTMC's Holding of Units 7A.5 Unit Splits, Distributions and Their Effect on NAV 7A.6 Measuring UTS Performance: Returns, Performance Tables, Risk Measures and Qualitative Factors 7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties 7A.8 Borrowing to Invest in UTS and the Risks of Loan Financing

10 Chapter 7B (Part 1): The Pension Landscape and the PRS Framework

7B.1 The Malaysian Pension Landscape and the Adequacy of Retirement Savings 7B.2 The World Bank's Five-Pillar Pension Framework in the Malaysian Context 7B.3 Key Players: EPF, KWAP, LTAT, Employer-Sponsored Schemes and Annuities 7B.4 Why Malaysia Needs PRS: Ageing, Longevity Risk and the Benefits of PRS 7B.5 The PRS Framework and the Private Pension Administrator (PPA) 7B.6 PRS Structure, the Trust and Deed, Advantages over Other Products, Eligibility and Contributions

11 Chapter 7B (Part 2): PRS Operations

7B.7 The PRS Default Option and Tax Incentives for Members and Employers 7B.8 The PRS Account Structure (Sub-Accounts A and B) and Vesting 7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death 7B.10 Switching Between Funds and Transferring Between PRS Providers (Portability) 7B.11 Unclaimed Monies, Death of a Member and PRS Nomination 7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming 7B.13 PRS Fees, Charges and Expenses 7B.14 PRS Unit Creation, Forward Pricing, Valuation, Distributions, Performance Measurement and Electronic Communication

3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds

Key Takeaways Explain This Topic AI

A listed REIT must keep at least 75% of its total asset value in real estate that generates recurrent rental income.

An unlisted REIT must keep at least 50% of its total asset value in real estate and/or single-purpose companies, with no more than 25% in non-real-estate assets and cash.

The same approved valuer cannot carry out more than two consecutive valuations of a REIT property, and real estate must be revalued at least once every three years.

A REIT's total borrowings must not exceed 50% of its total asset value at the time the borrowings are incurred.

The index tracked by an ETF must be diversified so that no constituent exceeds 20% of the index, or 35% for one constituent in an index made up solely of non-shares.

Last updated: October 2026

Why Separate Rules?

The FCE expects Consultants to know the headline rules for REITs and ETFs because investors compare them with UTS. Both are CIS regulated by the SC, but real estate and index-tracking create special issues of valuation, liquidity and diversification.

Real Estate Investment Trusts (REITs)
Asset requirements

Requirement Listed REIT Unlisted REIT

Permitted assets Real estate, non-real-estate assets, cash, deposits and money market instruments Real estate, single-purpose companies, real-estate-related assets, cash, deposits and money market instruments

Minimum in real estate At least 75% of total asset value in real estate generating recurrent rental income , at all times At least 50% of total asset value in real estate and/or single-purpose companies , at all times

Cap on other assets — Non-real-estate-related assets and cash, deposits and money market instruments not more than 25% of total asset value

Valuation

Because the REIT's promoter may be linked to the seller of a property, the SC regulates asset quality, valuation and disposals . Valuations must follow the SC's Guidelines on Asset Valuation :

the same approved valuer cannot do more than two consecutive valuations of a particular property; and

the Trustee must have each property (held directly or through a single-purpose company) revalued at least once every three years .

Repurchase and suspension

A listed REIT does not repurchase units: investors sell on Bursa Malaysia .

An unlisted REIT is normally expected to repurchase units within 30 days of a request. If the Trustee considers cancellation not in unit holders' interests (for example the property cannot be sold at a proper price), it may, with SC approval , suspend the repurchase covenant and must then call a meeting of unit holders to decide the REIT's future.

Size, borrowing and pledging

Rule Detail
Initial minimum size RM100 million (may be higher for later launches)

Uses of borrowing Acquire real estate and single-purpose companies (listed and unlisted); redeem units (unlisted)

Borrowing cap Total borrowings not more than 50% of total asset value when incurred

Pledging The manager may pledge REIT assets to secure permitted borrowings; going beyond the limit needs prior approval of the Trustee and the SC

Exchange-Traded Funds (ETFs)
Permitted assets and replication

An ETF's assets may consist only of transferable securities, units or shares in CIS, derivatives, and deposits and money market instruments . It can track its index by:

full replication – holding all or substantially all of the index constituents;
representative sampling – holding a sample of the constituents; or

synthetic replication – using derivatives to replicate the index.

Requirements for the underlying index

The ETF Guidelines require the index to:

Requirement Detail
Objective Have a clearly defined objective
Representativeness Appropriately reflect the market or sector
Diversification No constituent above 20% of the index
Exception If the index contains only non-shares , one constituent may go up to 35%
Other Broadly based; sufficiently liquid; transparent and easily accessible to investors
Investment restrictions (examples)

Securities not traded in an eligible market : no more than 10% of NAV .

Money market instruments, equities and debt securities of any single issuer : no more than 15% of NAV .

Deposits with any single financial institution : no more than 20% of NAV .

Futures only if sufficiently liquid, exchange-traded with a central counterparty, marked to market daily with at least daily margining, and cash-settled .

Depending on a fund's nature and objective, the SC may consider varying these limits on application by the Management Company.

Comparing the Three CIS

Feature Ordinary UTS REIT ETF
Main assets Securities, cash, CIS, derivatives Income-producing real estate Index constituents
Direct real estate Not allowed Core asset Not a permitted asset

How investors exit Repurchase by the manager within 7 business days Listed: sell on Bursa; unlisted: repurchase within 30 days Sell on Bursa

Key borrowing limit Temporary, for redemptions only (retail funds) Up to 50% of total asset value —
Applying It: Property Exposure for a Small Investor

Cik Nadia has RM5,000 and wants property exposure. A Consultant can explain her choices:

Direct property needs a large deposit, usually a loan, and is illiquid; she cannot sell part of a house.

A listed REIT gives exposure to income-producing property with a small outlay; she buys and sells on Bursa through a stockbroker, at a market price that may differ from NAV.

A UTS cannot hold real estate directly, but a balanced or REIT-focused unit trust can hold listed REIT units and property-related shares, priced at NAV and repurchased by the manager.

A PRS fund may invest in real estate, but the money is locked in for retirement under PRS withdrawal rules.

The right answer depends on her time horizon, liquidity needs and risk tolerance, which is why the Consultant must complete a suitability assessment before recommending anything (Chapter 4).