What a Trustee is all about under VPS Rules_ 2005 - Securities and by xiuliliaofz

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									ROLE OF TRUSTEE IN PROTECTING THE PENSION
FUND UNDER THE VOLUNTARY PENSION SYSTEM
     (VPS) AND OTHER PENSION SYSTEMS




                               Presented by:
                  Mohammad Hanif Jakhura
                        Chief Executive Officer
     Central Depository Company of Pakistan Limited

          Conference on Voluntary Pension System- August 11, 2005   1
     What a Trustee is all about under
            VPS Rules, 2005?
l   Appointment of Trustee
    For every pension fund, the Pension Fund Manager shall appoint
    a Trustee with the approval of the Securities and Exchange
    Commission of Pakistan (the “Commission”).

l   Trustee and Pension Fund Manager to be independent
    A director or employee of the Trustee shall not:
       – In any way be related to the Pension Fund Manger or its
          Directors or Investment Advisor
       – Be involved in any manner with the Pension Fund Manger

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       Eligibility criteria of a Trustee under
                   VPS Rules, 2005

l   A scheduled bank with minimum A+ rating from a
    credit rating company which is registered with the
    Commission and has been in business for atleast five
    years.
l   A trust company which is a subsidiary of a scheduled
    bank.
l   A foreign bank operating as a scheduled bank in
    Pakistan and providing trustee services internationally.
l   A central depository company approved by the
    Commission.

            Conference on Voluntary Pension System- August 11, 2005   3
               Regulatory / Legal Frame work

                                                                           Income Tax
                                                                           Income Tax
 VPS Rules,
 VPS Rules,                                                                Ordinance,
                                                                            Ordinance,
   2005
   2005                                                                       2001
                                                                               2001




                                        Trustee of VPS
                                     Trustee of VPS




Trust Deed &
Trust Deed &                                                               Companies
  Offering
  Offering                                                                 Companies
 Document                                                                Ordinance, 1984
                                                                         Ordinance, 1984
 Document


               Conference on Voluntary Pension System- August 11, 2005                     4
Obligations of the Trustee under VPS Rules, 2005
           Take control of all the property of the Fund.
        Title of all Fund property shall vest in the Trustee
                         [VPS Rule 31 (a)]
l   Bank accounts are opened in the name of the Trustee.
    Authorized signatories of the Trustee operate these bank
    accounts independently.
l   Book entry securities should be held in CDC account to be
    opened in the name of the Trustee. Only authorized users of the
    Trustee to have access of this account and should have full
    control over it.
l   Physical securities should either be kept in custody of the Trustee
    or should be placed with the sub-custodian appointed by and
    acting on the instructions of the Trustee.

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Obligations of the Trustee under VPS Rules, 2005


          Be liable for any act or omission of any agent
           appointed by the Trustee [VPS Rule 31 (b)]

l   If an agent (such as sub-custodian) is appointed by the Trustee
    to delegate any of its responsibilities, Trustee being the
    principal, shall continue to be liable for all acts performed by
    the agent on his behalf.




               Conference on Voluntary Pension System- August 11, 2005   6
Obligations of the Trustee under VPS Rules, 2005


      Ensure that the unit price is calculated and applied in
    accordance with the provisions of the constitutive documents
                         [VPS Rule 31 (d)]

l   Trustee should ensure that issue, redemption and cancellation of
    units are carried out in accordance with the constitutive
    documents.
l   Trustee should ensure that the Net Asset Value (NAV) is applied
    in accordance with the provisions of the constitutive documents.



                Conference on Voluntary Pension System- August 11, 2005   7
Obligations of the Trustee under VPS Rules, 2005
 Ensure that the methods adopted in calculating the value of
   units are in accordance with the constitutive documents
                      [VPS Rule 31 (e)]
 l   Assets should be valued as follows:
      – Listed securities:
          l Where price is truly representative of the market value,

            should be valued at last quoted price.
          l Where price is NOT truly representative of the market

            value as in the case of TFCs, Trustee, jointly with the
            auditor, shall suggest method of valuation.
      – Unlisted debt securities:
          l Be valued at fair value determined to the satisfaction of

            the Trustee.
               Conference on Voluntary Pension System- August 11, 2005   8
Obligations of the Trustee under VPS Rules, 2005


Carry out the instructions of pension fund manager if they are
        not in conflict with the constitutive documents
                       [VPS Rule 31 (f)]

l   Trustee should ensure that no transactions are executed which
    are covered under restrictions (e.g. participate in a joint account
    with others in any transaction – Rules 8 (e)).
l   Trustee should ensure that no transactions are executed with
    connected persons - Rule 27.



               Conference on Voluntary Pension System- August 11, 2005    9
Obligations of the Trustee under VPS Rules, 2005

Ensure compliance with the investment policy and borrowing
      limitations as set out in the constitutive documents
                      [VPS Rule 31 (g)]

l   Trustee should ensure that the given instruction fall within the
    parameter of:
     – Investment Policy – For example under Equity sub-fund:
        Invest atleast 90% of its NAV in listed shares.
     – Borrowing limitations – Borrowing allowed only in case of
        meeting withdrawal requests and transfers.


              Conference on Voluntary Pension System- August 11, 2005   10
Obligations of the Trustee under VPS Rules, 2005


     Issue an annual report to participants as to whether the
    pension fund manager has managed the Fund in accordance
         with the constitutive documents [VPS Rule 31 (h)]

l   Trustee to report all non-compliances and steps taken by the
    Trustee in respect thereof.




              Conference on Voluntary Pension System- August 11, 2005   11
Obligations of the Trustee under VPS Rules, 2005


    Ensure that units are allocated after receiving contributions
                           [VPS Rule 31 (i)]

l   The amount credited into Fund account in particular day is
    matched against the product of units issued and the offer price of
    that day.




                Conference on Voluntary Pension System- August 11, 2005   12
    Role of the Trustee in protecting Pension Funds


l   Commission may cancel / suspend / remove registration of
    Pension Fund Manager (PFM) if the Trustee reports that the
    PFM has failed to carry out duties to the satisfaction of the
    Trustee.
l   PFM shall account to Trustee for any loss caused to the
    Fund’s assets due to his negligence / willful act / omission.
l   PFM to appoint auditor with the consent of the Trustee.




               Conference on Voluntary Pension System- August 11, 2005   13
     What a Trustee is all about under
            VPS Rules, 2005?

l   Power of the Commission to give directions to trustees
    The Commission may, in the interest of the participants, capital
    market and public give directions to the trustees.


l   Retirement of Trustee
    A Trustee may retire with the prior approval of the Commission.




               Conference on Voluntary Pension System- August 11, 2005   14
       Key Operational Controls of VPS Trustee


l   Execute all settlement instructions on Delivery Vs
    Payment basis.
l   Maintain daily portfolio position.
l   Maintain daily fund position of all bank accounts.
l   Prepare daily portfolio reconciliation.
l   Prepare daily bank reconciliations of all bank accounts.
l   Daily reporting of fund position, portfolio etc. to Pension
    Fund Manager.
l   Review Fund’s financial statements on quarterly, half
    yearly and annual basis.

              Conference on Voluntary Pension System- August 11, 2005   15
            Thank you !
            Thank you !

Conference on Voluntary Pension System- August 11, 2005   16

								
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