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 »
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 »
The power is to direct the investment of the capital in such investments as the testatrix’s son may from time to time direct. Upon the language of the power as a whole, in my judgment, provided he acts in good faith, [the son] is entitled to give directions to the trustees to realise any investments constituting the trust fund which they from time to time may hold. In my judgment, upon the language of the clause, the trustees are bound to comply with those directions save that they are to satisfy themselves, the shares not being shares in which there is a free and open market, that the price which they pay for them is a reasonable and proper price at the time they make the purchase. 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 unit trust deed directs the appointment of agents or delegates in certain circumstances and the trustee or the manager is given no discretion. In some offshore unit trusts, the appointment of a custodian or investment adviser in certain markets or abroad may be made mandatory by the trust deed. Sometimes, an investment adviser’s contract may have been entered into prior to units being offered to the public. Thus, a property manager may have been appointed for a property trust. It is also very common for advisers to be appointed for futures and options funds, country funds, and trusts of specialized sectors. 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 »
