5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

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

5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

Key Takeaways Explain This Topic AI

Where a conflict of interest cannot be avoided, it must be disclosed promptly in writing to the investor, with priority given to the investor's interest.

Performing a switching transaction to generate sales commission or other benefits that are not in the investor's best interest is prohibited.

Distributors and Consultants must not provide forecasts of a scheme's future performance or make statements on yields or returns without an objective and reasonable basis.

Investors' personal and financial information may be disclosed only with the investor's written authorisation or where required by law or legal process.

Attempting a misconduct, doing preparatory acts, or abetting misconduct is itself treated as misconduct under the FIMM Code.

Last updated: October 2026

Core Principle 3: Avoidance of Conflict of Interest
Required conduct

Avoid any conflict of interest when dealing with an investor.

If a conflict cannot be avoided , promptly disclose it in writing to the investor, whether real or potential, and make sure the investor's interest comes first .

Distributors must have systems, policies and procedures to identify, avoid, disclose and manage conflicts.

Prohibited conduct

Performing any switching transaction to generate sales commission or other benefits (cash or in kind), or that is not in the investor's best interest.

Example: a Consultant persuades a client to switch from a no-load money market fund into a loaded equity fund just before a sales campaign deadline. If the switch is driven by the commission rather than the client's needs, it breaches Core Principle 3.

Core Principle 4: Disclosure of Information
Required conduct

Distributors and Consultants must provide accurate, timely and adequate information , including what is in the prospectus, disclosure document and PHS, and explain clearly the scheme's features:

No. Feature to explain
1 Investment objectives
2 Investment strategy
3 How unit prices are calculated
4 Risks , including the risk of investing through loan financing
5 Unique features
6 Distribution policy
7 Fees, charges and expenses, including how they are calculated
8 Restrictions, including fees and charges on early withdrawal
9 Tax implications
10 Cooling-off period

They must give enough information and explanation for the investor to understand the investment.

Prohibited conduct

Providing a forecast of future performance of any scheme.

Making statements on yields or returns without an objective and reasonable basis .

Concealing the different characteristics of schemes when comparing them.

Providing information on matters they are not competent to deal with.

FIMM's practice question: omitting a material fact when dealing with a unit holder or PRS member falls under disclosure of information .

Core Principle 5: Observance of Confidentiality
Required conduct

Safeguard investors' personal and financial information at all times, except where the investor has authorised disclosure in writing or disclosure is required by law or legal process to a relevant authority.

Distributors must have systems to protect this information, ensure officers do not misuse it (for their own or others' advantage, or to investors' detriment), and allow access only to the servicing Consultant or authorised officers .

Prohibited conduct

Disclosing an investor's information to a third party without prior written consent , unless required by the SC, a court order or written law.

Acquiring or using information about an investor or potential investor without proper authorisation .

Disseminating or exchanging investors' information with another Distributor, Consultant or third party.

Requesting or procuring investors' information from a third party, including another Distributor or Consultant.

The study guide links these duties to the Personal Data Protection Act 2010 (PDPA) .

Non-Compliance with the Code

Rule Detail

Misconduct Failing to comply with the Code or FIMM rules is misconduct , and FIMM may take disciplinary or other action

Attempts and preparation Attempting misconduct, or doing an act preparatory to or in furtherance of it, is misconduct

Abetment Abetting is misconduct: instigating or instructing someone, conspiring with others, or intentionally aiding misconduct by act or omission

Distributor's duty On discovering a Consultant's misconduct, establish a prima facie case and submit a comprehensive investigation report to FIMM

Whistleblowing Personnel or Consultants who believe a Distributor has breached FIMM rules or securities laws must report to FIMM; their identity is kept confidential as far as the law allows

Sanctions Under Chapter 6 of the FCR , which also sets out FIMM's investigation and disciplinary proceedings

FIMM's practice question on sanctions: a Consultant who breaches the Code may face a public reprimand and suspension of registration with FIMM . Imprisonment is not a FIMM sanction, and the SC does not hold Consultants' registrations.

Which Principle Applies?

Behaviour Core principle
Telling a client a fund "will return 8% next year" 4 – Disclosure (forecasting)
Not mentioning the exit fee when the client plans to withdraw early 4 – Disclosure (omitting material facts)
Switching a client mainly to earn commission 3 – Conflict of interest
Sharing a client list with a friend at another Distributor 5 – Confidentiality
Forging a client's signature 1 – Honesty and integrity
Accepting cash from a client 2 – Professionalism
Applying Chapters 4 and 5 of the Code: Three Short Cases

Case 1 – a request from another Distributor. A former colleague who now works for a different Distributor asks a Consultant for the names and holdings of clients who redeemed recently. Handing them over breaches Core Principle 5: it disseminates investors' personal and financial information to another Distributor, and the colleague, by asking, is requesting that information from a third party. The Consultant should refuse. Disclosure is allowed only with the investor's prior written consent or where the SC, a court order or a written law requires it.

Case 2 – misconduct found by the Distributor. A branch manager learns that clients deny signing switching forms submitted by one Consultant. The Distributor must establish a prima facie case and then submit a comprehensive investigation report to FIMM as soon as practicable once the report is complete. Forged signatures go to Core Principle 1 (honesty and integrity); switching clients mainly to earn commission engages Core Principle 3.

Case 3 – lending your name. A Consultant lets a colleague whose registration has lapsed submit sales under the Consultant's name. The colleague is using another Consultant's identity, which the Code prohibits under professionalism. The Consultant who knowingly allows it intentionally aids that misconduct, so the Consultant has committed misconduct through abetment , even without dealing with the investors personally.

Exam Pointers

An unavoidable conflict must be disclosed promptly and in writing , with the investor's interest first .

The ten features Consultants must explain run from investment objectives to the cooling-off period .

Forecasts of future performance are banned outright; statements on yields or returns need an objective and reasonable basis .

Confidential information can be released only with written consent or where law or legal process requires it.

Attempting, preparing for and abetting misconduct are all misconduct ; sanctions sit in Chapter 6 of the FCR .