HONG KONG SAR, CHINA Law and Practice Contributed by: Alfred Ip, Hugill & Ip
Second, the Trustee Ordinance permits trustees to delegate investment management functions to authorised agents, provided the trustee exercises reasonable care in selecting the agent, defining the scope of the delegation, and reviewing the agent’s performance. Where these conditions are met, the trustee is generally not liable for the agent’s defaults. This delegation framework is particularly important for family trusts with complex, multi-asset portfolios that require specialist investment management. Additionally, the court has jurisdiction under the Trus - tee Ordinance to relieve a trustee from personal liabil - ity where the trustee acted honestly and reasonably and ought fairly to be excused. This equitable relief provides a safety net for trustees who make genuine mistakes in good faith, though it is not available where the breach was deliberate or reckless. For a detailed analysis of anti-Bartlett clauses and their role in limit - ing trustee liability for underlying business manage - ment decisions, see Anti-Bartlett Clauses and Their The regulatory framework governing fiduciaries in Hong Kong is multi-faceted. The Trustee Ordinance (Cap. 29) provides the primary statutory framework for trustee duties, powers, and liabilities. Trust companies that carry on a trust business in Hong Kong must be registered under Cap. 29 and are subject to ongoing regulatory oversight. A trustee conducting activities that constitute “reg - ulated activities” under the Securities and Futures Ordinance (Cap. 571), such as managing a portfolio of securities or providing investment advice, must be licensed by the Securities and Futures Commission (SFC). The SFC’s regulatory requirements include minimum capital adequacy standards, fit and proper criteria for responsible officers, and obligations relat - ing to client asset protection and anti-money launder - ing (AML) compliance. Role in Trust Administration. 6.3 Fiduciary Regulation The AML and counter-terrorist financing framework is also directly relevant to fiduciaries. Under the Anti- Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), trust service providers are required to conduct customer due diligence, identify
beneficial owners, maintain transaction records, and report suspicious transactions to the Joint Financial Intelligence Unit. These obligations apply to the trus - tee’s relationship with the settlor, beneficiaries, and any underlying corporate entities. 6.4 Fiduciary Investment Hong Kong applies the prudent investor standard to fiduciary investments, as codified in Cap. 29. Trustees are required to exercise the care and skill of a prudent person making investments for the benefit of others, having regard to the need for diversification and the suitability of investments in the context of the trust’s overall portfolio. This standard is consistent with mod - ern portfolio theory, which evaluates investment risk at the portfolio level rather than in relation to individual assets. The statutory duty to diversify is a default rule that can be modified by the trust deed. In practice, trust deeds for family trusts frequently contain anti-Bartlett clauses, which relieve the trustee of the duty to inter - fere in the management of an underlying company or business held by the trust, and may also relieve the trustee of the duty to diversify where the trust fund is concentrated in the family business. The rationale is to allow the family to continue operating the business without the trustee being required to sell the holding in the interests of diversification. However, anti-Bartlett clauses have limits. The Hong Kong courts have confirmed that such clauses do not relieve the trustee of the duty to intervene where the trustee has actual knowledge of dishonesty or fraud in the management of the underlying company. The trustee retains a residual supervisory duty, and a blan - ket anti-Bartlett clause will not protect a trustee who willingly turns a blind eye to clear evidence of misman - agement or misconduct. This principle was reinforced in the significant case of Ivanishvili , Bidzina and oth- ers v Credit Suisse Trust Limited [2023] SGCH (I) 9 1, which has major ramifications for the interpretation of anti-Bartlett clauses in Hong Kong and other common law jurisdictions.
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