Study guide
7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties
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
7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties
Key Takeaways Explain This Topic AI
A Shariah-compliant fund's deed and prospectus or disclosure document must avoid terminology inconsistent with Shariah, such as interest-based instruments and interest income.
UTMCs and PRS Providers offering Shariah-compliant schemes must appoint a Shariah committee or Shariah adviser to supervise compliance.
Fund reports of a Shariah-compliant scheme include the Shariah adviser's opinion on whether the fund was managed in line with Shariah rulings and that its holdings are classified as Shariah-compliant by the SAC of the SC or of BNM.
A musyarakah contract exists among the unit holders or members, who share profit by capital contribution or an agreed ratio and share losses by capital contribution.
There is no contract between the UTMC or PRS Provider and the Trustee, but both act as agents of the investors under wakalah.
Last updated: October 2026
Same Structure, Shariah Rules
A Shariah-compliant UTS or PRS is very similar to a conventional one; the key difference is that all activities must comply with Shariah . The study guide treats Shariah-compliant UTS (Chapter 7A) and PRS (Chapter 7B) in almost identical terms, so they are covered together here.
Operational area Shariah-compliant requirement
Documentation The deed and prospectus or disclosure document must be drafted according to Shariah; terms such as interest-based instruments and interest income must be avoided
- Objective and strategy Capital and income growth within the scope of Shariah , with a strategy to match
- Excess cash Liquid assets and cash must be placed in Shariah-compliant instruments
- Daily compliance The compliance manager or officer ensures operations meet both SC and Shariah requirements
Supervision The UTMC or PRS Provider must appoint a Shariah committee or Shariah adviser (required by the UTF and PRS Guidelines)
Reporting Fund reports include the Shariah adviser's opinion on whether the fund was operated in line with the SC's Shariah rulings and a statement that its holdings are classified Shariah-compliant by the SAC of the SC or the SAC of BNM ; for instruments not classified by either SAC, a statement that their status was determined under the Shariah adviser's ruling
Chapter 2 covers screening by the SAC, reclassification and disposal of non-compliant securities, and Shariah non-compliance risk.
The Four Shariah Contracts
The relationships between the parties rest on Shariah contracts reflecting each party's obligations:
Relationship Shariah contract What it means
Among unit holders (or PRS members) Musyarakah A partnership to deal in specified investments; profit shared by capital contribution or an agreed ratio ; loss shared by capital contribution
UTMC (or PRS Provider) and Trustee No contract between them No direct relationship, but both are agents of the investors
Investors and UTMC (or PRS Provider) 1. Wakalah (agency) The manager acts for and on behalf of investors to invest and manage the scheme
2. Bai (sale) The contract of sale and purchase of units between investors and the manager, usually for cash
3. Wadiah yad dhamanah (guaranteed custody), before units are created Investors own the money; the manager is the custodian ; the contract arises when the manager receives payment
Investors and Trustee 1. Wakalah (agency) The Trustee acts for investors as custodian of the trust fund and safeguards their interests
2. Wadiah yad dhamanah , after units are created Investors own the units; the Trustee is the custodian of all fund assets (money and investments); the contract exists once units are bought and the manager deposits the investments with the Trustee
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Conventional vs Shariah-Compliant: Side by Side
- Feature Conventional UTS or PRS fund Shariah-compliant UTS or PRS fund
- Trust structure, Trustee, NAV pricing Yes Yes, identical
Permitted investments Any authorised under the deed and Guidelines Only Shariah-compliant instruments approved by the SAC and/or the Shariah adviser
- Cash placements Conventional deposits Islamic deposits or investment accounts
- Income from non-compliant sources Not applicable Cleansed and usually donated to charity
Extra oversight Compliance officer and other oversight functions Plus a Shariah adviser or committee (at least three advisers for a committee)
- Extra report — Shariah adviser's report in the fund reports
- Extra risk — Shariah non-compliance (reclassification) risk
- Remembering Which Custody Contract Applies When
The wadiah yad dhamanah contract moves with the money:
Before units are created, the investor's payment sits with the UTMC or PRS Provider , so the manager is the guaranteed custodian.
After units are created, assets sit with the Trustee , so the Trustee is the guaranteed custodian.
Worked Scenario
Puan Zainab invests RM5,000 in an Islamic balanced UTS.
Her payment reaches the UTMC: bai (she is buying units) and wadiah yad dhamanah with the UTMC as custodian until units are created.
The UTMC invests on her behalf: wakalah with the UTMC.
Units are created and investments lodged with the Trustee: wadiah yad dhamanah with the Trustee, which also acts under wakalah to safeguard her interests.
She shares the fund's profits and losses with all other unit holders: musyarakah .
The fund's surplus cash goes into an Islamic deposit, and the annual report carries the Shariah adviser's opinion.
Exam Pointers
Musyarakah = among investors. Wakalah = agency. Bai = sale. Wadiah yad dhamanah = guaranteed custody.
No contract between the manager and the Trustee.
Losses in musyarakah are shared by capital contribution .