Legal Status and Documents
A UIT may be constituted as either a regulated investment company (RIC) or a grantor trust. A RIC is a trust, corporation or partnership in which investors have common investment and voting rights but do not have direct interest in investments of the investment company or fund. A grantor trust, in contrast, grants investors proportional ownership in the underlying securities.
A UIT is created by a document called the Trust Indenture. This document is drafted by the Sponsor of the fund, and names the Trustee and the Evaluator. By US law, the Sponsor and the Trustee may not be the same. The sponsor selects and assembles the securities to be included in the fund. The trustee keeps the securities, maintains unitholder records, and performs all accounting and tax reporting for the portfolio. The largest issuer of UITs is First Trust Portfolios. Other sponsors include SmartTrust, Van Kampen Investments, Millington Securities, Advisors Asset Management, Inc. and Guggenheim Funds. Most large brokerage firms (such as Merrill Lynch and A. G. Edwards) sell UITs created by these sponsors.
Read more about this topic: Unit Investment Trust
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