5.2 Core Principle 1: Honesty and Integrity

FIMM Combined Examination FCE

Track your progress as you read

Finished sections get a check mark.

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

5.2 Core Principle 1: Honesty and Integrity

Key Takeaways Explain This Topic AI

Core Principle 1 requires Distributors and Consultants to act honestly and with integrity, act in investors' best interests, deal in good faith and treat investors fairly, and protect the industry's reputation.

Amending or altering any information provided by an investor without the investor's written consent is prohibited conduct under the FIMM Code.

Disclosing only the favourable features of a scheme, or comparing schemes using unrelated characteristics, counts as misrepresentation under the Code.

Consultants must not use the titles financial planner, financial advisor, investment advisor or investment consultant unless authorised by the relevant regulator or professional body.

Dealing in schemes or products that are unauthorised, unlicensed or published on an authority's alert list is prohibited.

Last updated: October 2026

The Required Conduct

Under Core Principle 1 a Distributor and Consultant must at all times:

act honestly and with integrity ;
act in the best interest of investors ;
deal with investors in good faith and ensure fair treatment ; and

uphold and protect the reputation of the industry .

The study guide sums it up: Distributors and Consultants must put the client's interests ahead of their own .

The Prohibited Conduct

The Code's Chapter 4 lists conduct that breaches this principle (the list is not exhaustive).

Dishonesty with money and documents

Prohibited Example
Misappropriating investors' funds Using a client's payment for personal expenses before passing it on

Knowingly or recklessly falsifying documents , or submitting falsified documents Back-dating an application form

Forgery , including forging an investor's or anyone else's signature Signing on the client's behalf "to save time"

Amending or altering investor information without written consent Changing the client's stated risk tolerance to fit the product

Using documents or information that are false or misleading Presenting an out-of-date fact sheet as current
Misrepresentation

The Code prohibits misrepresenting or making false or exaggerated statements about schemes, including:

the characteristics of schemes;
their past or present performance ;
names or advertising expressions likely to mislead investors;
outdated facts or information ;
disclosing only favourable features ; and

comparing schemes using unrelated characteristics .

It also prohibits making false statements or spreading false information about schemes, the SC, FIMM, the industry, or other Distributors or Consultants .

Unauthorised titles

A Distributor or Consultant must not use, adopt or display the designation "financial planner", "financial advisor", "investment advisor" or "investment consultant" unless authorised by the relevant regulator or professional body. (Chapter 6 explains when someone may lawfully call themselves a financial planner.)

Dealing in the wrong products

Distributors and Consultants must not deal in, introduce, promote, market or distribute, or be involved in any way with:

schemes or products not authorised or recognised under securities laws;
schemes or products they are not licensed or registered to market; or

schemes or products listed on an authority's alert list (such as the SC's Investor Alert List).

Applying the Principle

Scenario Breach? Why

A Consultant tells a client a balanced fund "returned 15% last year" when the figure is two years old Yes Using outdated information; misrepresenting performance

A Consultant shows only the fund's three best years in a presentation Yes Disclosing only favourable features

A Consultant introduces a client to an overseas "forex fund" that is not authorised in Malaysia Yes Dealing in unauthorised products

A Consultant corrects a typing error in the client's address after the client confirms the change in writing No The client gave written consent

A Consultant's business card says "Investment Consultant" without any licence Yes Unauthorised designation
Why Honesty Is Tested So Heavily

Misrepresentation and misappropriation are among the most damaging misconduct for investors and for the industry. FIMM's practice questions often describe a scenario and ask which principle applies. Remember:

Lies, forgery, falsification and misrepresentation → Honesty and integrity.

Omitting a material fact when explaining a scheme → Disclosure of information (Core Principle 4), as FIMM's own practice question confirms.

Switching a client to earn commission → Avoidance of conflict of interest (Core Principle 3).

Linking to the Study Guide's Duty of Care

The study guide's chapter on regulation says Consultants owe investors a duty of care : act with honesty, integrity and dignity; treat investors with respect and disclose all pertinent information; and not misrepresent the scheme, its funds or past performance. Core Principle 1 is the ethical foundation of that duty.

Protecting the Industry's Reputation in Practice

The fourth duty, upholding and protecting the reputation of the industry , reaches beyond individual sales:

Check before you promote. Before introducing any product or "investment opportunity" to clients, confirm it is authorised in Malaysia and not on the SC's Investor Alert List . Involvement "in any way" with an unauthorised scheme is prohibited, even without selling it.

No rumours. Spreading false information about another Distributor, a competing Consultant, FIMM or the SC damages trust in the whole industry and is itself prohibited.

Honest marketing materials. A fund name, slogan or chart that is likely to mislead investors breaches the principle even if every number is technically correct.

A Short Case

Encik Faiz, a Consultant, is two sales short of his monthly target. A client asks whether a new equity fund is "safe like a fixed deposit". Faiz is tempted to say "almost no risk – it has never lost money". That statement would be false and exaggerated about the fund's characteristics and performance, and would put his interest ahead of the client's. The honest answer explains that the fund's value can fall, that it is not a deposit and not guaranteed, and that the right choice depends on the client's risk profile.