3.3 Unit Investment Trusts
Unit investment trusts (UITs) are “pooled investments” like open-end and closed-end funds. 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,” as in other trusts) to unit holders. The Investment Company Act of 1940 defines UITs and states that UITs are organized under a trust indenture, contract of custodianship, agency, or similar instrument. They have no board of directors. Like open-end funds, UITs issue redeemable securities. Like a closed-end fund, however, UITs offer investors a one-time offering of a fixed number of units, generally in $1,000 blocks. Because the units are issued new, they must be sold with a prospectus. UITs are not actively managed and they do not employ investment advisers, so the securities within their portfolios rarely change.
A UIT has a stated termination date that varies according to the type of investments in the portfolio. A UIT in bonds generally terminates when the last bond r