In respect of the investment of the property of the unit trust, regulation 7.02.2 spells out clearly that it is not only a duty but also ‘a right’ of the manager to make decisions. Correspondingly, regulation 7.09 is drafted in negative terms so as to leave no doubt that the trustee’s obligation does not extend to a positive consideration on the merits of particular investments. In other words, the trustee has no ‘right’ to make an investment decision as its counterpart in an ordinary private trust. This is also echoed by regulation 7.03.1 which provides that ‘Nile manager may without the specific authority of the trustee give instructions to agents as to the acquisition or disposal of property of the scheme‘. But at the same time, regulation 7.03 requires the manager to restore the trust portfolio to its status quo if the trustee forms the opinion that the manager exceeds its power in a particular transaction. Read the rest of this entry »
It cannot be denied that by entering into the trust deed, both the manager and the trustee are entering into a venture that provides services to their `customers’ and that produces their income. This is cooperation in business, but is unlikely to constitute them a partnership. Basically, the test of the existence of a partnership is by reference to the definition of a partnership discussed and also by reference to the statutory rules regarding co-ownership of assets, sharing of gross return, and also sharing of profit.
There is no business in common. The demarcation of functions under the unit trust deed draws the line of business between them. In essence, the trustee is carrying on the business as a professional trustee and the manager is carrying on the business of investment management. Read the rest of this entry »
The conclusion from the foregoing discussion is that the trustee and the manager are not in partnership or in a general agency relationship. They are independent contracting parties to the unit trust deed. An examination of the terms of a typical trust deed of a non-authorized unit trust in detail reveals that the majority of the provisions are covenants made by either of them with unitholders or are provisions conferring powers or discretions on them by unitholders. When the regulations of the Financial Services (Regulated Schemes) Regulations 1991 are incorporated expressly into the trust deed of an authorized unit trust, it appears that they may be construed in the same manner. There are not many provisions that can operate as promises between these two parties. Read the rest of this entry »
