Examination Timing: 00H00M42S
A trustee is considering whether to delegate some of their investment responsibilities to an investment manager. The trust deed permits such delegation, but the trustee is unsure about the extent of their liability after delegating these responsibilities. Which of the following best describes the trustee's position after delegating investment responsibilities?
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When a trustee delegates investment responsibilities to an investment manager, they must exercise due diligence in selecting and supervising the investment manager. This includes ensuring the investment manager is competent and experienced. If the trustee fails to exercise due diligence, they may be liable for any losses incurred by the trust. However, if the trustee has acted reasonably in selecting and supervising the investment manager, they are not liable for the manager's decisions.
Key Point: Trustees must exercise due diligence in selecting and supervising investment managers. They are not liable for the investment manager's decisions if they have acted reasonably in their selection and supervision.
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