Standard Operating Procedure

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AMANAHRAYA INVESTMENT MANAGEMENT SDN BHD

Document No:

QP-COMP-01

Title: COMPLIANCE MONITOIRNG ON FUNDS MANAGEMENT

Revision No:

0

Date:

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PREPARED BYNURUL AMIRA BINTI

RAMLI

Executive, Compliance

VERIFIED BYRIDZA AHMAD

JALALUDIN

Head of Compliance

REVIEWED BYRIDZA AHMAD

JALALUDIN

Head of Compliance

APPROVED BY MEOR KHAIRI BAZID

Managing Director

REVISION FIRST SECOND THIRD FOURTH FIFTH

DATE

REVIEWED

REVIEWED

BY

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Document No:

QP-COMP-01

Title: COMPLIANCE MONITORING ON FUNDS MANAGEMENT

Revision No:

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Item Description Action by

OBJECTIVE

The purpose of this Quality Procedure [QP] is to ensure compliance with

legal requirements and internal policy when conducting monitoring

activities. This also to validate the daily transaction performs under funds

management activities and to identify any inconsistency in a daily

transaction with both external and internal rules and policies stipulated.

This is an effort to preclude violation of both regulatory and policy

upheld.

SCOPE

Report on a daily, weekly and monthly monitoring perform by

Compliance department.

DEFINITION OF TERMS

AMLA Anti-money Laundering

ARIM AmanahRaya Inevstment

Management

i. ARUTF

ii. ARSTF

iii. ARICMF

iv. ARCMF

v. ARIEF

i. AmanahRaya Unit Trust

Fund

ii. AmanahRaya Shaiah

Trust Fund

iii. AmanahRaya Cash

Management Fund

iv. AmanahRaya Islamic

Equity Fund

AMLO Anti-money Laundering Officer for

ARIM i.e. Compliance Officer

CEMC Credit & Equity Management

Committee

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Compliance Referring to the Compliance

department at ARIM

Discretionary Absence of ‘C’ at the beginning of

code i.e. C0466D

Excel Microsoft Excel is a spreadsheet

application developed by Microsoft

for Microsoft Windows and Mac

OS. It features calculation, graphing

tools, pivot tables, and a macro

programming language called

Visual Basic for Applications.

EPF Employee Provident Fund

Fund Manager [FM] The person(s) responsible for

implementing a fund's investing

strategy and managing its portfolio

trading activities at ARIM &

licensed with SC

GRMD Group Risk Management

Department

HEAD OF COMPLIANCE Mr. Ridza

KWB Kumpulan Wang Bersama

Marketing Marketing department at ARIM

OzAsia system Software deals with investment and

management of cash, equity, money

market, bonds and other financial

related instruments.

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PTR Portfolio Turnover Ratio

QP Quality Procedure

SC Securities Commission of Malaysia

Toms system Trade order management solution

REFERENCE

I. Equity quality procedure;

II. Marketing quality procedure;

III. Compliance internal process flow on OzAsia system;

IV. Unit trust fund/funds management policy;

V. Guidelines on Anti-money Laundering [AMLA] from Bank

Negara Malaysia [BNM];

VI. Anti-Money Laundering Act 2007; and

VII. Guidelines on AMLA from Securities Commission of Malaysia

[SC]

RESPONSIBILITY

It is intended that this limitation of responsibility is not only apply to

arising parties mentioned in the ‘action by’ column unless otherwise

based on circumstances to include those ARIM employees who are

directly or indirectly related to the circumstances mentioned in this QP.

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Item Description Action by

OPENING OF ACCOUNT – FUNDS MANAGEMENT

1. Marketing department shall create a new client file (for every

new client) which consist of details information pertaining to

client’s portfolio and direct mandates i.e. account opening forms,

Portfolio Management Agreement [PMA], investment deposits

via cheque, telegraphic transfer and etc [Kindly refer to

Marketing department QP on account opening for details of

completed documents required].

2. Complete set of client’s file, direct mandate and PMA shall be

given to Compliance department for safekeeping and Compliance

shall keep this file for at least 7 years based on the procedure of

record keeping. Incomplete documents shall be returned and

Marketing department is required to follow up with the potential

client.

3. Upon received direct mandate from Marketing (in form of paper);

Compliance to liaise with Fund manager responsible for new

client and to obtain confirmation on purported strategy to use.

Reference pertaining strategy to use, responsible FM, name and

details of client can be obtained from the direct mandate itself.

Compliance shall create new strategy as instructed by FM.

Creation of new strategy or to use the existing strategy stipulated

in the system both are carried out through OziaAsia system.4. It is crucially vital for Compliance to be familiar with codes

appear on the system for ease reference and accuracy of transferring instruction from FM to the system.

Kindly refer to Flowchart 1 on the complete process of creating new strategy or using the existing strategy in the OzAsia system.

Marketing

Marketing & Compliance

Compliance & Fund Manager

Compliance

STOP LOSS MONITORING

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Compliance shall ensure that FM is in compliance with the Equity policy

based on the following ‘stop loss policy’:


Compliance

Compliance

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Equity P

Monitoring shall be conducted on a daily basis in the OzAsia system.

General reporting stages:

1. To update the Head of Compliance on the status of monitoring on a daily task report and this daily report shall be sent via email to the Head of Compliance at the end of office hour for record purposes.

2. To record any breaches identified in the log book*.

3. To accumulate daily information of monitoring report conducted in a weekly report.

*any inconsistency found in the log book the daily email will prevail.

PROCEDURES

Currently monitoring stop loss are based on the following accounts:


6

Sectors Stop Loss Policya) Core

Holding and Thematic/ Momentum

The fund manager’s representative shall be required to inform the CIO immediately whenever a stock price falls 25% below its average cost price. The fund manager’s representative, the CIO and MD must reach an agreement for the next course of action, whereby the Investment Committee shall also be notified in the upcoming Investment Committee meeting.

b) Trading Domestic Stock: Cut loss shall be executed once the average price of the stock falls by 10%.

c) Foreign Not more than 15% below its average cost of price

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1. Kumpulan Wang Simpanan Pekerja [KWSP] C0423 [FM:Meor];2. Kumpulan Majlis Raja-Raja yang Dipertua Negara C0299 [FM:

Qawiem];3. Tabung Warisan Negeri Selangor C0497 [FM: Qawiem];4. Perbadanan Kemajuan Negeri Selanor C405 [FM: Qawiem];5. ARUTM For PB Trustee Services Berhad (ARIE) C0482 [FM: Yap

Jia];6. KWB Shariah Equity C0391[FM: Yap Jia];7. KWB Equity C0387 [FM: Meor];8. University Malaya C0166 [FM: Yap Jia]; and9. Lembaga Tabung Angkatan Tentera C0407 [FM: Qawiem].

1. In monitoring this report, Compliance shall focus on the ‘ % on change’ column on the report and shall ensure that this ‘% on change’ for every account under core holding, thematic and trading sections are not beyond the limits stipulated in the policy as per the above tabulation.

2. Compliance shall in a timely manner notify Fund manager

responsible for mandates found to be inconsistent with the policy to

obtain justification for the identified breach. Notification can be in

any forms of communication i.e. via email, phone call or to raise the

inconsistency during CEMC meeting. Fund manager or respective

person responsible for the mandate is required to provide immediate

justification and action plan as to mitigate such breaches.

3. Information that is inconsistent with the policy upheld shall be reported to the Head of Compliance and recorded in the log book* error.

The log book* error shall contains the following details*:

Compliance

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Date of breaches

Details

Action by compliance

Action by respective departments

By whom

Type of breach

Noted by

Information pertaining to daily monitoring conducted on stop loss shall

be recorded in the weekly report as well. Remarks shall be added at the

bottom of reporting when there is a breach yet has been rectified within

that week of reporting period.

Example:

*Note that this remarks section is not limited to notify on the rectification per se.

The weekly report for Stop loss shall contains the following details:

No

Stock code

Stock name

Total Cost

Compliance

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Remarks*:

i. Note that technical breach under account Kumpulan Wang Biasiswa Pengajian Tinggi Majlis Raja-Raja Yang Dipertua [299] for stock FGV has been rectified on 1st July 2014

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Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach

Type of Breach*(it can be technical or error from Fund Manager)

Fund Manager

Action by Compliance

Action by respective person/department

Date of rectification

Kindly refer to Flowchart 3 for details process flow of monitoring stop

loss in the OzAsia system.

SINGLE STOCK REPORT MONITORING


pertaining to ‘single stock exposure policy’ as per below:

2.7.1 Minimum Criteria for Investment for Portfolio Size of Below RM3 million

Single Stock Exposure for investment below 3 million.

For an equity portfolio size of RM3 million and below, equity investment can be allocated up to 20 different stocks (that are not affiliated to each other in terms of shareholding structure) with a maximum exposure of 25% of total account size to any single stock.

2.7.1 Minimum Criteria for Investment for Portfolio Size of RM3 million and Above

Single Stock Exposure for investment 3 million and

Core Holding

Thematic Trading

Limited to 10% of

Limited to 7% of total NAV

For stocks already included in the

Compliance &

Fund Manager

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above total NAV of the account. (Amended July 2011

of the account. Stock Universe: 2.5% of NAV For stocks outside the Stock Universe: 1.0% or RM10 million, whichever is lower.(Amended July 2011)

1. When report is retrieved via OzAsia system, Compliance shall focus on error status with the absent of comment on the ‘comment section’ of the report. This indicates that there is a new error identified on a particular stock yet comment need to be added. Such comment need to be obtained from the responsible Fund Manager of the stock. Comment from the Fund Manager may include one of the following yet not limited to:i. technical breach due to client’s instruction;ii. technical breach due to market movement; andiii.technical breach due to technical issue.

2. Monitoring shall be conducted on a daily basis in the OzAsia system.

3. Information that is inconsistent with the policy upheld shall be reported to the Head of Compliance and recorded in the log book error*.

4. Compliance shall in a timely manner notify Fund manager

responsible for mandates found to be inconsistent with the policy

to obtain justification for the identified breach. Notification can

be in any forms of communication i.e. via email, phone call or to

raise the inconsistency during CEMC meeting. Fund manager or

respective person responsible for the mandate is required to

provide immediate justification and action plan as to mitigate

such breaches.

Compliance


Compliance

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5. The log book* error shall contains the following details:

Date of breaches

Details



By whom

Type of breach

Noted by

6. Information pertaining to daily monitoring conducted on single stock report shall be recorded in the weekly report as well. Remarks shall be added at the bottom of reporting when there is a breach yet has been rectified within that week of reporting period.

Example:

*Note that this remarks section is not limited to notify on the rectification.


No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach


Fund Manager


Compliance &

Fund Manager

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Remarks*:i. Note that technical breach under account Kumpulan Wang Biasiswa Pengajian Tinggi Majlis Raja-Raja Yang Dipertua [299] for stock FGV has been rectified on 1st July 2014

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This weekly report comprises of daily monitoring conducted within a week shall be reviewed by the Head of Compliance.

Kindly refer to Flowchart 2 for details process flow of adding comment received from the Fund Manager in the OzAsia system.

CUSTOMER AND COMPANY CAPPING

Compliance shall act upon instruction received from the FM who’s acting

via instruction received from client on the following purpose:

I. to restrict purchase of stock/s; and/or

II. to restrict sale of stock/s; and/or

III. to permit purchase of stock/s; and/or

IV. to permit sale of stock/s.

For illustration purposes, Company A instructed FM not to proceed with

any purchase of stock B yet sale of existing stock B in hand is permitted

to be sold and conversely.

Capping functions to lock the stock for not being purchased or sold until

further notice or instruction received from client. In the event where there

is new FM in charge for the existing client, this capping will work

Compliance &

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simultaneously.

Kindly refer to the Flowchart 4 on the complete process of customer and

company capping in the OzAsia system:

SECURITIESPROHIBITION

Buying Selling

1. RHB Capital Berhad x x

2. Bursa Malaysia Berhad x √

3. Malaysian Resources Corp. Berhad x √

4. Media Prima x √

5. Pharmaniaga Berhad x x

6. United Plantation Bhd x √

7. Plus Expressway Berhad x x

8. Malaysian Building Society (MBSB) x x

9. Proton Holdings Berhad √ x

Diagram 1: Examples of prohibition on securities

FAIR VALUE AND EQUITY ORDER & CONFIRMATION

REPORT


pertaining to ‘Best execution price’ policy as per below:

Compliance &

Fund Manager

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In brief the burden is on the FM to ensure that every transaction performs

i.e. buying of stock shall not exceed 2% of the initial price offered;

Comparison is made between ‘order price’ and ‘confirm price’ on the

report for every stocks buy. Compliance may refer to the ‘portfolio name’

column to identify FM responsible of carrying out such transaction.

Kindly refer to the Flowchart 5 on the complete process of monitoring ‘Fair value’ in the OzAsia system:


Information that is inconsistent with the policy upheld shall be reported to the Head of Compliance and recorded in the log book* error.

Compliance shall in a timely manner notify Fund manager responsible for

Compliance

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Item Compliance Guidelines on Policies Governing Investment Management

6.1 Best Execution Price:a. ARIM must always provide the best possible terms for a client when dealing and that the best execution is monitored and documented.b. When dealing ARIM should take due care and ensure that price offered by a broker is the best available taking into consideration the size and nature of the transaction.c. Prior to executing any investments for a client, ARIM shall ensure that:–

the investment transaction is carried out in accordance with the client’s mandate and within limits prescribed in the PMA; and

the relevant account has sufficient assets to meet the obligations of the transaction.

d. Best execution price is defined as the price, which is within a reasonable spread of the last traded price, “reasonable” being defined as within a 2% tolerance.e. A price lying outside the spread price may still satisfy best execution price, as the price will be viewed in light of the liquidity and volatility of the market concerned. The Fund Manager shall also provide and explanation.

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mandates found to be inconsistent with the policy to obtain justification

for the identified breach. Notification can be in any forms of

communication i.e. via email, phone call or to raise the inconsistency

during CEMC meeting. Fund manager or respective person responsible

for the mandate is required to provide immediate justification and action

plan as to mitigate such breaches.

The log book* error shall contains the following details:

Date of breaches

Details



By whom

Type of breach

Noted by

Information pertaining to daily monitoring conducted on single stock report shall be recorded in the weekly report as well. Remarks shall be added at the bottom of reporting when there is a breach yet has been rectified within that week of reporting period.

Example:

Compliance

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Remarks*:


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No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach


Fund Manager





BROKER ALLOCATION


as per below:

Compliance &

Fund Manager

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Monitoring on the broker allocation shall be conducted on a yearly basis

despite of this Compliance will internally conduct monitoring on a

monthly basis for record purposes.

If monthly report shown (specifically referring to the % amount at the left

end side of the report) that broker allocation exceed 20% of the total

dealings comparison is then made between reports of the current month

with the report of 4 months earlier.

Information that is inconsistent with the policy upheld shall be reported to

the Head of Compliance and recorded in the log book* error.









Date of breaches

Details

Compliance

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Item Compliance Manual6.2 a. Approval from the Investment Committee must be

obtained for the appointment of a Broker.b. ARIM shall only deal with brokers on its approval broker list, which shall be evaluated annually. The evaluation shall be coordinated by the Compliance Officer.c. It is the responsibility of ARIM to exercise due diligence as to whether the broker is fit and proper to carry out investment business. When evaluating brokers the following shall be considered:- Credit risk Investment idea Sales service, including brokerage commission charged Quality of research Efficiency of execution and settlementd. The execution of ARIM’s trades shall not exceed 20% of the total dealings in value in any one financial year.

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By whom

Type of breach

Noted by

Kindly refer to the Flowchart 6 on the complete process of monitoring

broker allocation in the OzAsia system:

Information pertaining to monthly monitoring conducted on broker allocation report shall be recorded in the weekly report as well. Remarks shall be added at the bottom of reporting when there is a breach yet has been rectified within that week of reporting period.

Example:



No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Compliance

Compliance

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Remarks*:


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Date of Breach


Fund Manager




ASSET ALLOCATION:

Asset allocation refers to the allocation of asset based on client or

company mandate on the following allocations:

i. equity; and

Compliance &

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ii. cash

Compliance shall ensure that the set up table for both equity and cash are

not above or below the minimum or maximum % limits stipulated. Error

is identified whenever the words ‘error’ is appeared at the remarks

column of the report.











Date of breaches

Details



By whom

Type of breach

Noted by


asset allocation in the OzAsia system.


Example:

Compliance

Compliance

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No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach


Fund Manager





OVERALL STOCK REPORT:


as per below:


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Remarks*:


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2.7.1 Minimum Criteria for Investment for Portfolio Size of RM3 million and Above

Collective Minimum Weighting Requirement (“CMWR”) or Exposure Limit

Core Holding

Thematic Trading

CMWR (in terms of market value) of 40% of total market value of all equity holding at all time.

No restriction on CMWR but maximum collective weighting (in terms of market value) of 55% of total market value of all equity holding.

Shall not exceed 10% of total NAV of the account.

Appearance of asterisk symbol ‘*’ indicate that there is error on the

report; and error may be formed due to the following factors yet not

limited to:

i. set up table above or below the set up limit; or

ii. no of main stock above or below the minimum or maximum number of

Compliance


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stock stipulated i.e. either stock hold exceed or limit exceeded.

Compliance to neglect error formed on Non-Discretionary account as this

non-discretionary account is based on client or company mandate and

shall focus on error identified on Discretionary account instead.


overall stock in the OzAsia system.











Date of breaches

Details



By whom

Type of breach

Noted by


Example:

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No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach


Fund Manager




This weekly report comprises of daily monitoring conducted within a

week shall be reviewed by the Head of Compliance.

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Remarks*:


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MONEY MARKET PLACEMENT FOR KWB:

Compliance will receive daily email from GRMD pertaining to Money Market, Bond and Equity Reports in the intranet at http://172.16.7.22 accompanied by the summary of the report. Monitoring on this placement shall be conducted on a weekly basis.

Compliance then will have to extract the data from ARIM’s Intranet. Kindly find the process to retrieve report from the intranet as follows:

1. Follow or click on the link given http://172.16.7.22; after the web appear then Scroll down to reports section and select money market.2. Money market daily report will appear. Then Compliance has to select the current year report i.e. Report of 2014.3. Then, money market daily report list out by months will appear. Compliance to select report based on current month i.e. August144. Finally, report based on daily date will appear. Compliance to select report based on the current date. i.e.ReportMM_05August14.xls5. Open the report in Excel format. There are 4 sections in the Excel, yet please refer specifically to the KWB limits.6. On KWB limits section; Compliance shall focus on the concentration limits as highlighted [usually in yellow] that indicates the highest concentration limits of counterparty above all.7. Choose top 3 counterparties with the highest amount of concentration limits by ranking.

The next stage is to generate report from the OzAsia system by following the procedure in the Flowchart 9.

Compliance

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http://172.16.7.22/

http://172.16.7.22/

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Report generate by OzAsia is compared with report retrieve from the intranet to ensure consistency of reporting. Comparison specifically made between the values of Money Market outstanding from GRMD’s report with value of principal amount retrieve from OzAsia system.

Note: Since today’s report can only be generated on the following day thus

GRMD’s report is dated based on the following date rather than the actual date

of reporting. For example, GRMD’s report dated 8th August 2014 reflected report

dated on 7th August 2014.


Example:



No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach

Compliance

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Remarks*:


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Fund Manager






MONITORING MONEY MARKET PLACEMENT FOR OTHERS

ACCOUNT

This report is similar to money market placement for KWB. The difference between these two reports is in terms of the financial institution where for other accounts only two financial institutions are being monitored which are Bank Islam (for shariah portfolio) and Hong leong investment bank (for non-shariah portfolio). Others account means that, all D and non-D account that managed by ARIM will consolidated as one account (except for KWB and EPF clients). Monitoring for other account shall be conducted on a weekly basis.

Kindly refer to the Flowchart 9 for the detail process flow of generating report for other account in OzAsia system.

Note: to ensure that the money market placement is not more than 20% of total NAV.


Example:

Compliance

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Remarks*:


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No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach


Fund Manager





week shall be reviewed by the Head of Compliance.Fixed Income & Compliance

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BOND VALUATION AND BOND SOLD

Compliance shall remind Fixed Income department i.e. Daryl to provide

weekly updates by Fixed Income on Bond purchased and Bond Rating

Migration (i.e. period from 14th July to 18th July 2014), if any.

Upon retrieving this information from Fixed Income department,

Compliance shall compile the information into the weekly report

specifically on the bond purchase and bond migration sections. Both of

these sections will accumulate the number of bond purchase and bond

migration throughout the year.

The accuracy of information on the bond disposal received from Fixed

Income department can be verified by making comparison with the report

generate from the OzAsia system.

Kindly find the process of retrieving report on bond disposal through

OzAsia system on Flowchart 10.


Compliance

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Example:



No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach


Fund Manager






Fund Manager & Compliance

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Remarks*:


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PORTFOLIO TURNOVER RATIO

Note that churning can be identified based on the excessive trading by a

broker in a client's account largely to generate commissions. Churning is

an illegal and unethical practice that violates both external and internal

rules. Frequent buying and selling of securities that does little to meet the

client's investment objectives may be construed as evidence of churning

as well. Churning can be identified through portfolio turnover ratio report

where Compliance shall ensure that monthly portfolio turnover ratio

report does not exceed 0.5%.

Below is the policy that shall be adhered with:

Kindly refer to Flowchart 11 on how to generate report from the OzAsia

system.

Compliance

31

Chapter 6 Compliance Guidelines on Policies Governing Investment Management6.5 (b) Churning: ARIM must not make deals on behalf of a client unless there are reasonable grounds for doing

so, with the deals being in the best interest of the clients therefore, any dealing with undue frequency (churning) is prohibited.

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When monitoring portfolio performance report, Compliance shall focus

on the current ‘PTR for month (%)’ column (at the end of the report) as

report will accumulate information of the earlier months up to one

financial year and shall ensure that monthly portfolio turnover ratio report

does not exceed 0.5% of PTR. Instead of performing self-generating

report, Compliance may also use monthly PTR given by operation

department as reference as both referring to the same report. Monitoring

performs on both Shariah and conventional accounts.


Example:



No

Stock code

Stock name

Total Cost

Market Value

G/L (Gain or loss)

% On change

Set up Limit

Sector

Date of Breach

Equity & Compliance

Compliance

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Remarks*:


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Fund Manager






STOCK UNIVERSE

Compliance shall perform quarterly update on the list of stock universe

provided by Equities and Research department the comparison is then

made between the lists given by ERD with the list of stock universe in the

OzAsia system. The purpose is to ensure that every new stock purchased

is updated in the system.

Note: as per the common practice every new single stock initiated during CEMC

meeting shall be updated immediately.

Kindly refer to Flowchart 12 for the complete flow of generating report

from the OzAsia system.

Confirmation shall be obtained from ERD pertaining to any updates made

on the system.

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ANTI MONEY LAUNDERING

OBJECTIVE

Objectives of this document are to provide guidance to analyst’s for

execution of compliance duties in accordance with the AMLA. This

document is anticipated to be reviewed frequently and amended with new

policies or procedures as required to continue improving AMLO’s

analytical functions.

ARIM is committed to the highest standards of anti-money laundering

(AML) compliance and requires management and employees to adhere to

these standards to prevent use of ARIM products and services for money

laundering purposes. Adherence to this policy is the responsibility of all

employees.

RELATIONSHIP WITH EXISTING POLICIES

This document shall be read together with other documents issued by

Bank Negara Malaysia relating to compliance with AML/CFT

Compliance

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requirements guidelines issued by SC on AMLA & internal guidelines of

AMLA produced by ARIM.

OVERVIEW

Compliance shall monitor AMLA via OzAsia System and Toms.

Marketing department as the front liner shall also adhere to this procedure

of accepting new clients and work hand in hand with the Compliance

department.

Compliance shall note that OzAsia system is use for the purpose of

monitoring transaction on the funds management section while Tom’s

system is use for monitoring transactions on Unit trust funds.

OZASIA SYSTEM:

Daily report shall be generated from the OzAsia system as to monitor any

suspicious transaction relates to money laundering.

Report retrieved could describe transaction based on the following:

i. Capital injection; or

ii. Creation of units; or

iii. Initial investment.

High level of scrutiny shall be performed on the transaction conducted by

Individual that could trigger AMLA if the amount exceeds the limits

stipulated in the bank Negara Malaysia circulars.

If transaction performs by public company such as EPF then there will be

no suspicious of money laundering as this is a public company. Concern

shall be given to the corporation (private company) i.e. Chocolate chip

Sdn Bhd and individual i.e. Mohd Ismail.

PROCEDURE

Successful report generated will produce report with header ‘Customer

Audit From xx.xx.20xx to xx.xx.20xx*

Code for of Individual or company can be found under the heading of

Compliance

Compliance & Affected departments

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‘Ringgit Malaysia’. Compliance shall refer to the list of Customer

summary portfolio to identify the undecoded name of individual or

company with the Fund manager responsible of handling such account.

*Since monitoring is conducted based on a daily basis therefore example of date

that will appear on the report; ‘’Customer Audit From 19 Aug 2014 to 19 Aug

2014’’.

Compliance shall then refer to the description of the report retrieved to

identify whether the transaction perform is capital injection, creation of

units or initial investment.

Highlight shall be given at the amount of money transacted that can be

retrieved under the column of ‘’amount’’ or ‘’base amount’’ or ‘’total for

ringgit malaysia’’.

Any suspicious transaction shall be reported to the Head of Compliance and recorded in the log book* error.

Compliance shall in a timely manner notify marketing department i.e.

Puan Latifah to obtain justification for the suspicious transaction and to

suspend the suspicious account. Notification can be in any forms of

communication i.e. via email, phone call or face to face interaction.

Respective person responsible of performing such transaction is required

to provide immediate justification and action plan as to mitigate such

suspicious transaction from occurring.

Compliance shall retrieved all the information pertaining to the suspected

individual or company i.e. the opening account form, due diligence form,

kyc form as to perform thorough investigation i.e. whether transaction

perform by this individual or company is compatible with their financial

standing and to come out with conclusion as to whether report received

from the executive compliance or marketing representative* suggesting

money laundering or not.

*report of suspicious transaction is not limited to compliance officer and

marketing representative only nevertheless the burden is equivalently shared

with all ARIM upon identifying suspicious transaction.

Upon thorough investigation and the head of compliance found out that

there is no money laundering in placed then record of all documents

Compliance

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retrieved from the investigation conducted shall be kept for at least 6

years based on the requirement of Bank Negara Malaysia.

However, upon thorough investigation Compliance found out that there is

suspicious money laundering hence Compliance is obliged to report to the

Bank Negara Malaysia by filling in the prescribed form of suspicious

transaction from Bank Negara Malaysia and lodged it to the Bank Negara

Malaysia. Compliance shall notify the Board of Directors too and

suspected account shall remain to be suspended until further notice from

Bank Negara Malaysia.

Information pertaining to daily monitoring conducted on funds management shall be recorded in the weekly report specifically under the section 6.0 AMLA Monitoring for direct mandate. Remarks shall be added at the bottom of reporting when there is a breach yet has been rectified within that week of reporting period.

Example:


The weekly report shall contains the following details:

No

Stock name

Initial investment

Capital injection

Suspicious transaction


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If there is no transaction for the day or for the whole week, Compliance

shall leave the report blank with indication of ‘NIL’ and slashed out the

information table.

Such Information shall be reported to the Head of Compliance and recorded in the log book* error as well.


Date of breaches

Details



By whom

Type of breach

Noted by

Kindly refer to the process of generating report form the OzAsia system

as per the Flowchart 12.

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TOMS SYSTEM:

This system is designed specifically to monitor transaction on the unit

trust funds as per below:

i. ARUTF

ii. ARSTF

iii. ARICMF

iv. ARCMF

v. ARIEF

When generating the report via Toms; Compliance shall focus on the

name of company or individual that appears on the ‘unit holder name,

joint holder name, agent name and bank description’’ column.

Compliance shall note that transaction perform by which funds can be

identified on the header of the report generated i.e. AmanahRaya Islamic

Equity Fund.

Compliance

Compliance & Affected departments

Compliance

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Compliance shall focus on the investment amount invested by the client

whether it trigger the money laundering amount for individual and

company. Compliance may refer to the guidelines on Anti- Money

Laundering by Bank Negara Malaysia or Securities Commission of

Malaysia.

Any suspicious transaction shall be reported to the Head of Compliance and recorded in the log book* error.

Compliance shall in a timely manner notify marketing department i.e.

Puan Latifah to obtain justification for the suspicious transaction and to

suspend the suspicious account. Notification can be in any forms of

communication i.e. via email, phone call or face to face interaction.

Respective person responsible of performing such transaction is required

to provide immediate justification and action plan as to mitigate such

suspicious transaction from occurring.

Compliance shall retrieved all the information pertaining to the suspected

individual or company i.e. the opening account form, due diligence form,

kyc form as to perform thorough investigation i.e. whether transaction

perform by this individual or company is compatible with their financial

standing and to come out with conclusion as to whether report received

from the executive compliance or marketing representative* suggesting

money laundering or not.

*report of suspicious transaction is not limited to compliance officer and

marketing representative only nevertheless the burden is equivalently shared

with all ARIM upon identifying suspicious transaction.

Upon thorough investigation and the head of compliance found out that

there is no money laundering in placed then record of all documents

retrieved from the investigation conducted shall be kept for at least 6

years based on the requirement of Bank Negara Malaysia. Compliance

shall keep all records and documents of daily transactions, in specific

files i.e. stop loss record file and equities and research department.

While Marketing department shall keep all records and documents of

transactions, in particular, those obtained during customer due diligence

Marketing department

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procedures, for at least six years after the transaction has been completed

or after the business relations with the customer have ended.

In situations where the records are subject to on-going investigations or

prosecution in court, they shall be retained beyond the stipulated retention

period until it is confirmed by the Financial Intelligence Unit in Bank

Negara Malaysia, that such records are no longer needed.

In addition, the records kept must enable the reporting institution to

establish the history, circumstances and reconstruction of each

transaction. The records shall include at least:

the identity of the customer;

the identity of the beneficiary;

the type of transaction(e.g., deposit or withdrawal);

the form of transaction (e.g., by cash or by cheque);

the instruction and the origin and destination of fund transfers;

and

the amount and type of currency.

However, upon thorough investigation Compliance found out that there is

suspicious money laundering hence Compliance is obliged to report to the

Bank Negara Malaysia by filling in the prescribed form of suspicious

transaction from Bank Negara Malaysia and lodged it to the Bank Negara

Malaysia. Compliance shall notify the Board of Directors too and

suspected account shall remain to be suspended until further notice from

Bank Negara Malaysia.

Information pertaining to daily monitoring conducted on funds management shall be recorded in the weekly report specifically under the section 6.0 AMLA Monitoring for unit trust fund. Remarks shall be added at the bottom of reporting when there is a breach yet has been rectified within that week of reporting period.

Compliance

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Example:


The weekly report shall contains the following details:

No

Stock name

Initial investment

Capital injection

Suspicious transaction




If there is no transaction for the day or for the whole week, Compliance

shall leave the report blank with indication of ‘NIL’ and slashed out the

information table.

Such Information shall be reported to the Head of Compliance and recorded in the log book* error as well.


Date of breaches

Details



By whom

Type of breach

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Noted by

Kindly refer to the process of generating report form the OzAsia system

as per the Flowchart 12.

NEW CLIENT

Risk profiling shall be conducted through know your customer form,

enhanced due diligence form and account opening forms. These forms

must be filled up by every new client. Marketing side shall ensure that

forms are completed before submit to Compliance for verification

purposes.

Below are the list of forms required to be completed and given to customer agreed to invest with ARIM and to be verified by the compliance officer*:

-Fund application form-Redemption form-Product Highlight Sheet-Suitability Assessment form

Marketing & Compliance

Marketing

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-Know Your Customer form-FIMM pre investment form-Qualified investor declaration form

*Note that documents are slightly varied depends on the types of investor i.e. individual or company and type of investment whether in a wholesale or retail fund.

None of the transaction shall be proceed without compliance verification

and client has 7 days to provide ARIM (based on ARIM internal policies

of accepting new client) with full disclosure of information and

documents needed from the date of informing that documents or

information provided is incomplete. Marketing representative has the

obligation to follow up with the necessary clients.

For every new client injection or withdrawal will be signed-off by

Compliance upon received from the Marketing side. The responsibility is

on the Marketing department to ensure that log book* is signed in a

timely manner. The log book* is signed by Compliance officer and

verified monthly by the Head of Compliance.

CLIENT’S COMPLAINT

ARIM is required to deal with complaints immediately within the context of a formal complaints procedure. The complaints procedure to be applied:-

To both oral and written complaints There are two types of complaint: Significant and non-

significant complaintsa) Complaint: misleading, unsatisfactory or

unacceptable conduct of ARIM. Complaint can be channelled via two mediums as follows:

i) Management levelj) SC/FIMM or any other regulatory

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levelb) Query: mere talking, not materially impact

to investment

In addition, ARIM shall ensure that–

complaints from its clients are handled in a timely and appropriate manner;

clients’ complaints are satisfactorily resolved; it maintains a register of complaints received and any

actions taken; and the compliance officer has a copy of the register.

The process flow as follows:

a) If an oral or a written complaint is received, make a written note of the

detail as soon as possible

b) Forward one written copy of any complaint to the Compliance Officer

immediately

c) The Compliance Officer will log the complaint in the Complaints

Register, and determine whether the complaint is of a significant nature

or not;

d) Compliance will identify whether the complaint relates to a minor and

isolated mechanical or clerical error, the complaint is not deemed

significant or the complaint should still be dealt with as quickly as

possible, in the interests of good relations.

e) Both types of complaint received by the compliance Officer need to be

recorded and the Compliance Officer will provide a Complaint Form to

the staff who received the complaint for completion and further

investigation. (refer Appendix 1)

f) The complaint will be investigated by the Compliance Officer, who is

“independent”. In this context, “independent” means that the person

should have no involvement in the events given rise to the complaint.

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g) When it becomes apparent that the complaint cannot be resolved

within 5 days, the Compliance Officer shall write a holding letter to the

client to advice the matter is still being investigated.

h) If the result of the investigation indicated that the complaint is

significant than the Compliance Officer is required to report to SC &

FIMM or EPF (if related) on quarterly basis.

i) All significant complaint should be submitted to the Risk Management,

Compliance Committee [RMCC] for deliberation and action.

j) A complainant who is not satisfied may refer the complaint to the

Securities Commission [SC]/ [FIMM] and [EPF].

Alternatively client may also lodge their complaint to the following regulators in the event of dissatisfied with ARIM ways of handling complaint:

Client’s Reporting Procedures

a) Securities Commission of Malaysia

If client suspect abuses Complaints concerning dealings in unit trust in ARIM and is able to support claims, client may submit complaint to the SC.

Complaint should include details such as:

Name of the complainant, mail and email addresses, and telephone numbers.

The name, mail and email addresses, telephone numbers, and any website address of party(ies) mentioned in the complaint

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Specific details of how, why and when the matter complained about arose

Complaints then will be referred to the appropriate department within SC here a possible breach of securities laws is detected, the matter will be referred to the Investigation Department of the SC for further investigations.

If client has a complaint regarding a monetary dispute not exceeding RM100, 000.00 against a licensed intermediary, client may be eligible to seek the assistance of the Securities Industry Dispute Resolution Center (SIDREC). SIDREC is a body approved by the SC to handle monetary claims by investors against stockbrokers, futures brokers, fund managers and unit trust management companies, amongst others, who are licensed under the Capital Market and Services Act 2007, to conduct regulated activities in Malaysia. Queries to SIDREC can be directed to.

The following is the sample of complaint form to SC:

http://www.sc.com.my/wp-content/uploads/eng/html/invAffairs/complaintsForm.pdf

(Appendix ii)

b) Federation of Investment Managers of Malaysia

If client has a complaint against ARIM, client may lodge the complaint by completing and submitting online FIMM’s complaint form provided https://www.fimm.com.my/contact/complaint-online/ (Appendix iii)

Alternatively, client may download form at https://www.fimm.com.my/wp-content/uploads/2013/06/Complaints-Form-Template-March-2014.pdf (Appendix iv) and submit the

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completed FIMM’s complaint form to:

Legal, Secretarial & Regulatory AffairsFederation of Investment Managers Malaysia19-06-1, 6th Floor, PNB DamansaraNo. 19, Lorong DungunDamansara Heights50490 Kuala LumpurTel: 03-2092 3800Fax: 03-2093 2700E-mail: [email protected]

To allow complaint to be investigated properly, client should give full and accurate information, including:

name, correspondence address, contact number and e-mail address;

specific details of how, why and when the subject matter of the complaint occurred

particulars of the member, distributor or consultant complained against, including name, correspondence address, contact number and e-mail address

documentary evidence that supports complaint

c) EPF [Complaint pertaining EPF MIS]

Oral complaint can be channelled via EPF call centre:

Telephone number: 03-89226000

Or any written complaint can be channelled via:

Fax number: 03-89226222 (Fax cover note)

Operating Hours Monday to Friday: 8.00 am to 6.00 pm.

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Closed on Saturdays, Sundays and Federal and Selangor Public Holidays.

7.0 QUALITY RECORD NIL

8.0 ATTACHMENT

9.0 DOCUMENT HISTORY

Revision No. Date Description

0 19/09/2014 Issue for use

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10.

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FLOWCHART As attached

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Documents

Standard Operating Procedure