On The Trustee’s Duty Of Prudential Investment

Originated in England, trust has been used as an effective way for assetmanagement in many countries, and turned into an innovative financial instrument inasset management in the economy. Along with the development of the economy,diversification of wealth formats, and changes of the investment environments, thevalue orientation of trust changes from the traditional management and transfersystem to property active management system, to realize the hedge against inflationand value-added functions for the entrusted property. Under the direction of moderntrust, the importance of the trustee is obvious in trust relationships under trust law.The trustee holds the title and the right of management and investment of theentrusted property, and its behavior of investment directly affects the realization ofright of trust beneficiaries. In order to maximize the interest of the beneficiary, the lawshall provide that the trustee shall fulfill the obligation of the prudential investment inthe process of the trust property investment. Under Common Law system, the trust ismore developed, and the provision of the trustee’s duty of prudential investment isalso more thorough. However, under the framework of Trust Law of China, there is nospecified and explicitly provisions for the prudential investment of the trustee. Thispaper discusses the rule of trustee’s duty of prudential investment in the common law system, analyzes the shortcomings of corresponding provisions in our country andputs forward the opinions and suggestions to the inadequate legislation and design forthe duty of prudential investment.Besides the introduction and the concluding parts, this paper contains threechapters.Chapter one is a brief introduction to the basic theories of trust and the trustee,including two sections. The first section presents the concept and the developmentcourse of trust. And in the second section the legal position and basic obligations ofthe trustee are introduced in brief. This paper describes the viewpoint that the trusteeis an important factor in the relationship of the trust, and the duty of prudentialinvestment belongs to the trustee’s duty of care.Chapter two is the comprehensive interpretation for the trustee’s duty ofprudential investment, including four sections. The first section introduces thedevelopment and evolving process for the duty of prudential investment in commonlaw system. The second section takes a scientific demarcation for the duty ofprudential investment, and analysis the reason of its generation. The third sectionanalyses the internal demand for the trustee’s duty of prudential investment. Based onthe foregoing three detailed parts, the fourth section gives the definition of legalresponsibility and the bearing means for trustees, if they fail to perform the duty ofprudential investment.Chapter three puts forward the suggestion for changing and improving therelated provisions of the duty of prudential investment in our country. And thischapter is divided into two sections. The first section describes the present situationand defect for this question. And the second section gives some measures toconsummate the legislation and system design for the trustee’s duty of prudentialinvestment.