On The Trustee'S Duty Of Prudent Investment

This dissertation mainly studies the prudence issue when the trustees exercise the powers of investment, and then indicates that the duty of prudent investment in the law of trusts of Anglo-American law system and the duty of bona fide administrators'care in Civil law system display the requirement of prudence respectively. After describing the trustee's liability for breach of trust and the legal hindrance in the localization of the duty of prudent investment, this paper puts forward several suggestions about the transplantation of this duty of prudent investment.Chapter one is the general interpretation of trustee's duty of prudent investment. It illustrates the power to invest as one of powers of administration and disposition, and then absorbs the basic idea of the power to invest, trying to seek two reasons about trustees'holding powers of investment, which includes both the requirement of appreciation and the advantage of financial planner. Thereafter, with the basis of the comparison of trusts between in Anglo-American law system and in Civil law system, it argues that the power to invest trust funds is one basic power of the trustee. When investing trust funds, a trustee should take such care as a prudent investor would take.Three reasons about the requirement of prudence when trustees invest, are discussed in this Chapter. High risk underlying in the investing market can be construed as the economic reason. Whether the trustees invest prudently decides the benefits of the investors. The requirement of prudence can be used to bind the trustee'power to invest trust funds, trying to prevent the abuse of authority.How does the trustee's duty of prudent investment play in the law of trusts? This issue turns out to be the research focus in the following chapters.Chapter two indicates that the prudence standard applies to the trust investing in the law of trusts of Anglo-American law system. It follows that trustees should observe how prudent investors manage their own affairs. A trustee is not liable to a beneficiary to the extent that the trustee acts in reasonable reliance on the prudence standard. Further more, the study is focused on the obligation of prudence about United Kingdom and United States'law of trusts in this Chapter."Legal lists"originating from U.K., had played an important role early in trust corpus preservation, and then presents the rigidity of the investment vehicles and conservatism of the investment types. Although The Trustee Investment Act 1961 was reformed, it was still influenced by the"legal lists", until the Trustee Act 2000 undertakes to update trust investment law in recognition of"Modern Portfolio Theory". As far as the prudence standard is concerned, the law of trusts in U.S.A. has experienced a process from Legal Lists Rule, Prudent Man Rule to Prudent Investor Rule. Modern Portfolio Theory is the theoretical resource of the Prudent Investor Rule, while Restatement (Third) of Trusts and Uniform Prudent Investor Act evaluates the core of this Rule.The duty of bona fide administrators'care in Civil law system is identified in the third Chapter. A comparable prudence standard for the administration of trust property is imposed in a trustee: he shall discharge his duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. The duty of bona fide administrators'care is general, so it can be classified by some specific duties, such as the duty of the trustees to administer the trust property and their own propery respectively, and the duty to act personally.The trustee's liability for breach of trust in relation to the standard of prudence (or care) is analyzed in the fourth Chapter. It argues that this liability resembles in the liability for both default of obligation and act of tort. This dissertation holds that the trustee's liability for the breach of trust to the beneficiary is limited to trust property, while the trustee holds the unlimited liability to the third party. Lastly, the legislative history and practice of the trustee's duty of prudent investment in relation to invest trust funds in China, as well as the localization of this duty, have been deeply discussed in the fifth Chapter.This paper explain that although the trustee's duty of prudence in relation to investment has been constructed primarily, it still exists the ambiguity and simplicity in this regard. Whereas, it is necessary to transplant the operating standards in the Anglo-American law of trusts into Chinese law, and then to reconstruct our trust investment law through modern portfolio theory.