Unit Investment Trusts (UITs): Terminated Life, Fixed Portfolio, and Lack of Board
Which of the following characteristics accurately describes a Unit Investment Trust (UIT) registered under the Investment Company Act of 1940?
UITs feature a FIXED, unmanaged portfolio assembled by a sponsor, a stated termination date, redeemable trust units, and NO board of directors (supervised by a trustee).
Complete Analysis & Legal Rationale
A Unit Investment Trust (UIT) is one of the three statutory categories of investment companies under the Investment Company Act of 1940: (1) Fixed Portfolio: The trust purchases a static portfolio of bonds or stocks that remains fixed for the life of the trust with no active portfolio management; (2) Governance: It has a trustee and sponsor, but NO board of directors; (3) Finite Life: It has a predetermined termination date when remaining assets are liquidated and returned to unit holders; (4) Redemption: Units are redeemable with the issuer.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
UITs feature a FIXED, unmanaged portfolio assembled by a sponsor, a stated termination date, redeemable trust units, and NO board of directors (supervised by a trustee).
Fails to adhere to packaged product rules for B.
Fails to adhere to packaged product rules for C.
Fails to adhere to packaged product rules for D.
Official Standard: A Unit Investment Trust (UIT) is one of the three statutory categories of investment companies under the Investment Company Act of 1940: (1) Fixed Por