Standard Of Trustee's Prudence In Investment

Trustees should fulfill their obligation of prudence when they make decisions of investment. How to determine the trustee is prudent in investment, is the key to see whether the trustee should take responsibility of the investment loss. There are there parts in the body of this paper.Part one talks about the level of trustee's prudence in investment. The standard of trustee's prudence in investment has been developed through three steps, from legal list rule, prudent person rule to prudent investor rule. According to the different level of prudential investment obligation, obligation is divided into non-professional standard and professional standard. Non-professional standard includes low standard, medium standard and high standard. Different standard applies to various trustees. Medium standard applies to the general trustee. Professional standard applies to the professional trustee. High standard applies to the investment trustee.Part two talks about the agreed on obligation of prudence in contract. If the obligation is agreed on, we should refer to the provision in contract. Trustees should obey the contract to make decision in investment and fulfill the obligation in contract.Part three is about how to define the standard without contract. When there is no agreed standard in contract, we need to determine whether the trustee meets the standard from other perspectives, which include investment target, investment diversification, cost of investment, examination of trust, adjustment to trust and prudence of sub-delegation.