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.
Where provisions in the deed embody covenants made with unitholders, they can be enforced by unitholders as promisees. In respect of an exercise of power or discretion by the trustee which is without good faith or otherwise wrongful, unitholders can sue the trustee for breach of trust. In the case of the manager, unitholders may bring an action for an abuse of power on the basis of a breach of fiduciary duty. Thus, there is no problem of standing to sue for aggrieved unitholders. Read the rest of this entry »
(1) Statutory Allocation of Powers and Duties
Against this background, a structure of dual administration in the unit trust is a logical step in the functional specialization of the powers and responsibilities previously found in the single person of the trustee. The unit trust was in the forefront of this development. The first regulation of unit trusts in the United Kingdom in 1939 made the trustee-manager structure a model for the management of unit trusts. This model was adopted by many statutes of common law countries and was followed closely by unregulated schemes. Read the rest of this entry »
Under section 83 of the Financial Services Act 1986, a manager of an authorized unit trust is not permitted to engage in activities other than acting as a manager of a unit trust, an open-ended investment company, a `body corporate whose business consists of investing its funds with the aim of spreading investment risk and giving its members the benefit of the results of the management of its funds‘,” or a collective investment scheme. The Act does not restrict the activities of the trustee of a unit trust and its position is governed by equitable principles above discussed.
As noted earlier, dealing in units is the contractual right of the manager. Any gain by the manager from issuing and redeeming units is not a secret profit and therefore is not accountable to anyone. This is the position of the manager of an authorized unit trust if it discloses prominently in the scheme particulars a statement to this effect. Read the rest of this entry »
The trust in a unit trust is a trust with two limbs, a primary trust and a secondary trust. The primary trust is a trust whilst the scheme is a going concern. It may be interpreted as a trust of the Re Denley’s type or as a trust subject to the contractual provisions of the trust deed and, in the case of an authorized unit trust, the regulations made under section 81 of the Financial Services Act 1986. The secondary trustonly arises at the very moment when the trust scheme is terminated. It is a trust for sale and distribution.
The provisions to which the primary trust is subject depend on whether the unit trust is an authorized unit trust or non-authorized unit trust. The most important of these provisions will be those along the line of regulation 7.02.2 and regulation 7.09.1. Regulation 7.02.2 provides: Read the rest of this entry »
Although the manager has extensive control over the ways that the trust assets are to be invested or dealt with, it is not a trustee. This is because the title to assets does not vest in it.
The first question is whether the manager’s power is a fiduciary power or a beneficial power for its own benefit. Scott and the American Restatement draw a clear distinction between such powers in the discussion of a private trustee being subject to directory or veto powers of others. It has been questioned if such a distinction exists in English cases. Indeed, judges in early English cases did not appear to be particularly concerned with enunciating such a principle. However, there is no reason to doubt that Scott’s position represents the English position as well. The early case Discconson v. Talbot supports such a proposition. So do cases on veto powers and some cases on powers of appointment. Read the rest of this entry »
Section 84 of the Financial Services Act 1984 provides:
Any provision of the trust deed of an authorised unit trust scheme shall be void in so far as it would have the effect of exempting the manager or trustee from liability for any failure to exercise due care and diligence in the discharge of his functions in respect of the scheme.
This section only applies to authorized unit trusts. Exemption clauses in non-authorized unit trusts are not affected. Read the rest of this entry »
This covers the situation where the trustee or the manager is given the discretion to delegate all or some of the duties and powers to a third party if it so wishes. In this sense, delegation permitted in equity or under the Trustee Act 1925 is permissive in nature.
For an authorized unit trust, the position is governed by regulation 7.15 of the Financial Services (Regulated Schemes) Regulations 1991. In general, subject to two broader categories of restrictions, and also subject to any restriction in the trust deed, both the trustee and the manager are permitted to delegate any of their functions to any person, including the trustee and the manager themselves. The delegation permitted by this regulation is not confined to ministerial acts but extends to any discretion. Read the rest of this entry »
