Prudent Investors 1996

APPENDIX B

Versions of the Prudent Investor Rule

Conference of Commissioners on Uniformity of Legislation in Canada (1970)
(also New Brunswick, Yukon and Northwest Territories)

1. Unless a trustee is otherwise authorized or directed by an express provision of the law or of the will or other instrument creating the trust or defining his powers and duties, he may invest trust money in any kind of property, real, personal or mixed, but in so doing, he shall exercise the judgment and care that a man of prudence, discretion and intelligence would exercise as a trustee of the property of others.

2. A trustee may, pending the investment of any trust money, deposit it during such time as is reasonable in the circumstances in any bank or trust company or in any other corporation empowered to accept moneys for deposit which has been approved for such purpose by the Lieutenant Governor in Council.

3. Sections 1 and 2 apply to trustees acting under trusts arising before or after the coming into force of this Act.

Manitoba Trustee Act, R.S.M. 1987, c. T160

68(2) Subject to any express provision of the will or other instrument creating the trust, in investing money for the benefit of another person, a trustee shall exercise the judgment and care that a person of prudence, discretion and intelligence would exercise in administering the property of others.

Nova Scotia Trustee Act, R.S.N.S. 1989, c. 479, as am. by S.N.S. 1994-95, c. 19

3 Subject to Sections 4 and 5, a trustee may, for the sound and efficient management of a trust, establish and adhere to investment policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments to avoid undue risk of loss and to obtain a reasonable return.

4 The Governor in Council may make regulations prescribing or prohibiting the investment of money by a trustee in particular investments and prescribing investments or classes of investments in which money may be invested by a trustee for the sound and efficient management of a trust.

5 Nothing in Section 3 or 4 permits a trustee to invest in investments that are expressly forbidden by the instrument, if any, creating the trust.

Ontario Law Reform Commission - Draft Trustee Act (1984)

4.-(1) In the discharge of their duties and the exercise of their powers, whether the duty or power is created by law or the trust instrument, trustees shall exercise that degree of care, diligence and skill that a person of ordinary prudence would exercise in dealing with the property of another person.

(2) Without limiting the generality of subsection (1), trustees who in fact possess, or because of their profession, business or calling ought to possess, a particular level of knowledge or skill which in all the circumstances is relevant to the administration of the trust, shall employ that particular level of knowledge or skill in the administration of the trust.

34.-(1) Subject to section 4, trustees may invest trust money in any kind of property.

(2) In investing trust money under subsection (1), among the matters which it is appropriate for trustees to consider are the following:

1. The marketability of the investment.

2. The length of the term of the investment, including its maturity date, callability and redeemability.

3. The probable duration of the trust.

4. The probable condition of the market with respect to the value of the investment at the termination of the trust, especially if at the termination of the trust the investment must be converted into money for the purpose of distribution.

5. The probable condition of the market with respect to reinvestment at the time when the investment matures.

6. The aggregate value of the trust estate and the nature of the other investments.

7. The effect of the investment in increasing and diminishing liability for taxes.

8. The likelihood of inflation.

(3) Nothing in subsection (2) imposes an obligation upon trustees to consider each of the matters mentioned in that subsection before deciding upon any investment.

NCCUSL Uniform Prudent Investor Act (1994)

§ 1. Prudent Investor Rule.

(a) Except as otherwise provided in subsection (b), a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule set forth in this [Act].

(b) The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the provisions of the trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on provisions of the trust.

§ 2. Standard of care; Portfolio Strategy; Risk and Return Objectives.

(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.

(b) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.

(c) Among circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries:

(1) general economic conditions;

(2) the possible effect of inflation or deflation;

(3) the expected tax consequences of investment decisions or strategies;

(4) the role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;

(5) the expected total return from income and the appreciation of capital;

(6) other resources of the beneficiaries;

(7) needs for liquidity, regularity of income, and preservation or appreciation of capital; and

(8) an asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.

(d) A trustee shall take reasonable steps to verify facts relevant to the investment and management of trust assets.

(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this [Act].

(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.

Employee Retirement Income Security Act, 29 U.S.C. § 1104(a)1

1104. Fiduciary duties

(a) Prudent man standard of care
(1) ... a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and -

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administering the plan;

(B) 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 a like character and with like aims;

(C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter.

Restatement of Trusts 3d, s. 227 (1992)

The trustee is under a duty to the beneficiaries to invest and manage the funds of the trust as a prudent investor would, in light of the purposes, terms, distribution requirements, and other circumstances of the trust.

(a) This standard requires the exercise of reasonable care, skill, and caution, and is to be applied to investments not in isolation but in the context of the trust portfolio and as a part of an overall investment strategy, which should incorporate risk and return objectives reasonably suitable to the trust.

(b) In making and implementing investment decisions, the trustee has a duty to diversify the investments of the trust unless, under the circumstances, it is prudent not to do so.

(c) In addition, the trustee must:

(1) conform to fundamental fiduciary duties of loyalty and impartiality;

(2) act with prudence in deciding whether and how to delegate authority and in the selection and supervision of agents; and

(3) incur only costs that are reasonable in amount and appropriate to the investment responsibilities of the trusteeship.

(d) The trustee's duties under this Section are subject to the rule of s. 228, dealing primarily with contrary investment provisions of a trust or statute.

Next Annual Meeting

2017 Conference

Hotel Saskatchewan

Regina, SK

August 13 - 17, 2017
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