All RE5 questions
Financial Products Apply knowledge of the financial products and services environment
Which statement about a unit trust (a collective investment scheme in securities) is INCORRECT?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) Investors' money is pooled and invested in a portfolio of underlying assets.
- b) Each investor holds participatory interests whose price reflects the value of the portfolio.
- c) The investor can normally sell participatory interests back to the management company.
- d) The management company guarantees that investors will get back at least the capital they invested.Correct
Why this is the answer
A unit trust pools investors' money in a portfolio, each investor holds participatory interests priced on the net asset value, and the manager repurchases units on request, which makes the investment liquid. The value moves with the underlying assets and there is no guarantee of capital, which is a material risk that must be disclosed.
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