Definition of Unit of Beneficial Interest

A Unit of beneficial interest is the redeemable unit issued to investors in a unit investment trust or UIT. Unlike management companies that issue shares to represent investors’ interest in the underlying portfolio, a UIT must issue units of beneficial interest. The UIT is required to maintain and provide liquidity to investors who wish to redeem their units.

Applying "Unit of Beneficial Interest" to Securities Exams:

Investors who purchase a unit investment trust or a UIT will receive units of beneficial interest as evidence of ownership in the UIT. The value of the account will be determined by the number of units owned multiplied by price of the units. A unit investment trust (UIT) will invest either in a fixed portfolio of securities or a nonfixed portfolio of securities. A fixed UIT will traditionally invest in a large block of government or municipal debt. The bonds will be held until maturity, and the proceeds will be distributed to investors in the UIT. Once the proceeds have been distributed to the investors, the UIT will have achieved its objective and will cease to exist. A nonfixed UIT will purchase mutual fund shares in order to reach a stated objective. A nonfixed UIT is also known as a contractual plan. Both types of UITs are organized as a trust and operate as a holding company for the portfolio. UITs are not actively managed, and they do not have a board of directors or investment advisers. If you are taking the series 6 exam series 7 exam or series 26 exam, be on the look out for questions regarding the operational requirements of a UIT. Be sure you are ready to pass your exam with our greenlight exam and our money back pass guarantee.

Good Luck on your exam !

The Securities Institute of America, Inc.

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