Deck 19: Investment; Management and Delegation

Question 1

Which of the following is the most accurate statement?

A) The power to invest applies automatically to all trusts.
B) The power to invest applies only to trusts which contain an express power to this effect.
C) The power to invest applies only to trusts which already have some investments.
D) Whether there is a power to invest depends upon the nature and purpose of the trust concerned.

Answer 1

D

Question 2

Which of the following statements most accurately explains the general powers of investment conferred upon trustees of a trust? (Think carefully before selecting an answer).

A) Trustees are limited to making low risk investments.
B) Trustees may only make investments according to an approved statutory list of investments.
C) Trustees may make high or low risk investments in the interest of the trust, provided they take expert advice and take responsibility for ensuring that the investments are properly balanced.
D) Trustees may make any investment they wish, risky or otherwise, if they consider it to be in the best interests of the trust to do so.

Answer 2

C

Question 3

Martin is the trustee of a family trust, over which he has powers of investment. The trust includes shares in a variety of companies and cash assets. The trust directs Martin to hold the property on trust for Wendy for life, and on Wendy's death for the Royal Society for the Protection of Birds.
Advise Martin as to which of the following statements are a false statement of his powers in relation the trust property:

A) Martin must keep the cash on bank deposit, but can change the other investments as he wishes.
B) Any proceeds received as dividends on shares must be reinvested in the trust fund.
C) Martin must have regard to keeping a balance between income generation and capital growth in reviewing the trust investments from time to time.
D) Martin can change the investments if a company is underperforming or to increase the range of investments.

Answer 3

A , B

Question 4

Martin is the trustee of a family trust, over which he has powers of investment. The trust includes shares in a variety of companies and cash assets. The trust directs Martin to hold the property on trust for Wendy for life, and on Wendy's death for the Royal Society for the Protection of Birds.
Advise Martin as to which one of the following statements most accurately describes his obligations in making investment decisions

A) The only consideration to which Martin may have regard in making investment decisions is the financial performance of the investment. He cannot choose not to make investments in firms which conduct activities which may be harmful to birds and other wildlife.
B) Because the fund will ultimately go to the Royal Society for the Protection of Birds, the only investments which Martin can make are in firms which do not conduct activities which may be harmful to birds and other wildlife.
C) Martin must consult Wendy before making any decision about investment which has been influenced by avoiding investments in firms which conduct activities which may be harmful to birds and other wildlife.
D) Martin should have regard both to financial considerations and to the desirability of avoiding investments in firms which conduct activities which may be harmful to birds and other wildlife.

Question 5

Which of the following statements is most accurate?

A) The Trustee Act 2000 does not permit trustees to delegate their powers to select investments, it only allows them to delegate the administrative functions of buying and selling.
B) The Trustee Act 2000 permits trustees to delegate the exercise of all investment functions, including deciding on the suitability of individual investments and the administrative functions of buying and selling those investments.
C) The Trustee Act 2000 refers to the possibility of trustees delegating their asset management functions. It does not permit trustees to delegate decisions about the suitability of individual investments.
D) The Trustee Act 2000 deals with the duties of trustees, not their investment powers. Trustees' powers of investment are contained in the Trustee Investment Act 1958 as amended.

Question 6

Bea and Cee are trustees of a family trust including a number of commercial properties and a share portfolio. They are familiar with managing the commercial properties, but wish to delegate the task of managing the share portfolio.
They have identified Dee and Associates Ltd, an experienced asset management company, which they wish to appoint for this purpose. Which of the following requirements does not apply?

A) They must make or confirm the appointment of Dee and Associates Ltd in writing.
B) They must provide Dee and Associates Ltd with a written policy statement giving guidance as to the investment criteria, and require Dee and Associates Ltd to comply with this policy statement.
C) They must exercise reasonable care in the selection of Dee and Associates Ltd.
D) They must meet with Dee and Associates Ltd at least annually to review the performance of the investments and of the company.

Question 7

Which of the following (more than one applies) are where you would expect to find the powers of trustees to deal with trust property?

A) The trust instrument.
B) Trusts of Land and Appointment of Trustees Act 1996
C) Trustee Act 1925
D) Trust Me, I'm a doctor

Question 8

Which of the following statements is most accurate?

A) All trustees have the same powers of management.
B) Trusts of land are different, but all other trusts confer the same management powers on trustees.
C) The powers of trustees can vary considerably from trust to trust, depending upon the type of trust, the relevant statutory provisions, and the provisions of the trust instrument.
D) Statutory powers of management can never be varied or excluded by express terms.

Question 9

Hudson and Blanche are the trustees of a discretionary trust in favour of the employees of New Hudson Enterprise Ltd. They are seeking to lawfully delegate some their trustee functions to other, more experienced persons and so free up their own time to go on ocean cruise holidays. Which of the following functions may Hudson and Blanche not delegate under the general delegation powers in the Trustee Act 2000?

A) Any of their functions, as they must have a good reason to delegate any function to another.
B) The power to decide which of the employees of New Hudson Enterprise Ltd are to benefit under the discretionary trust.
C) Decisions as to how to invest the trust property in the best interests of the beneficiary.
D) The organisation of an auction to sell trust property that Hudson and Blanche have decided should be sold and the proceeds added to the capital of the trust,

Question 10

Which of the following statements is false?

A) Trustees must exercise reasonable care in selecting an agent to whom they are delegating functions.
B) Trustees must exercise reasonable care in monitoring the actions of an agent to whom they have delegated functions.
C) Trustees are liable for any loss occasioned by an agent to whom they have delegated functions.
D) Trustees can delegate functions which they are capable of discharging personally.

Question 11

Lucky and Sam are the trustees of a collection of paintings acquired by Joe during his career as the proprietor of an art gallery. They have no special expertise. They decide to sell some of the paintings and employ Michael's Gallery Ltd to sell the paintings at auction. One of the artworks is acquired for £500 by Philip Mould, who, after extensive research, proves that it is by Lucian Freud and is worth over £1million.
Which of the following statements is most likely to be true?

A) Lucky and Sam are liable for the difference between the value of the painting and the price for which it was sold only if it can be shown that they acted without reasonable care in selecting, appointing, or supervising the agent, and that this failure was causative of the loss.
B) Lucky and Sam are liable for the difference between the value of the painting and the price for which it was sold because this is the loss which has been suffered by the trust, and they have a duty to make good the shortfall.
C) Lucky and Sam are liable for the difference between the value of the painting and the price for which it was sold if it can be shown that they failed to exercise reasonable care at any point.
D) Lucky and Sam will only be liable if they had cause to believe that the painting was exceptionally valuable before they consigned it for sale.