Series 24: Unit Investment Trust Companies

Taken from our Series 24 Online Guide

Unit Investment Trust Companies

Unit investment trusts (UITs) are investment companies that buy and hold a fixed portfolio of securities that are put into a trust and sold in “units” (also known as “shares of beneficial interest”) to unit holders. According to the Investment Company Act, UITs must be organized under a trust indenture, contract of custodianship, agency, or similar instrument and have no board of directors.

A trust indenture is a legal document that specifies the features of a trust and holds the issuer to its terms. The document is a contract between the issuer (depositor) and an independent trustee, whom the issuer appoints to hold the investor’s funds and protect the investor’s rights, as stated in the indenture. The trustee is usually a bank or trust company that holds title to the investor’s funds. A custodial or agency agreement is similar, except that the agent or custodian may be an individual and does not hold title to the invested funds.

Like an open-end fund, unit investment trusts issue redeemable securities, meaning that they cannot be bought and sold in the open market but can only be redeemed by (or returned to) the issuer. Like a closed-end fund, however, UITs

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