10. Trustee Duties: Investment

Question 2

Can trustee’s ‘invest’ by making unsecured loans?

Answer 2

this would not be viewed as an investment so should not be done unless the trust deed VERY CLEARLY allows it

Question 3

Where can a trustee look to ascertain their investment powers under a trust?

Answer 3

1. Trust instrument (always first)
2. TA 2000 if nothing / not alot in trust instrument

Question 4

Authorised investments for trustees to make

Answer 4

1. Anything they could if they were absolutely entitled to the trust (except investments in land)
2. Land: must be freehold or leasehold land in the UK for investment, occupation or another reason

Question 5

Duties of trustees when purchasing investments

Answer 5

1. Requirement of adherence to the ‘standard investment criteria’ comprising of
   a. suitability
   b. diversification
2. Regular review + obtaining expert advice unless unnecessary

Question 6

When can a trustee take ethical considerations into account when deciding how to invest a trust’s funds

Answer 6

(i) if an investment in an ethical concern is likely to yield as good a return as an investment that is more morally dubious, the trustees can invest in the ethical concern;
(ii) if the trust is charitable, the trustees can properly refuse to invest in things that might be at odds with the charitable purposes of the trust and that might alienate the
charity’s supporters; and
(iii) the settlor can set out in the declaration of trust that trustees should not invest in specific sectors that the settlor considered to be unethical.

Question 7

Conditions for a trustee validly delegating financial decision making to an agent

Answer 7

1. Trustee must retain investment agent by written agreement
2. Prepare policy statement illustrating guidance (prepared by all trustees) and secure compliance to this in written agreement
3. agent must comply with same statutory and other duties which apply to trustees
4. regular review - update policy statement as necessary
5. person selected must be a reasonable choice

Question 8

Is a trustee liable for acts / defaults of their agents wrt investment decisions?

Answer 8

1. No, if the trustee has not breached their duties in appointing them (and that has caused loss to the trust)