TRUSTEE SECURITIES

Hokitika Guardian, 11 July 1930, Page 8

TRUSTEE SECURITIES

LIMITATIONS EXPLAINED

ACT FIXES. DEFINITE SECURITY

Tiie question as to what classes oi i lives linen is are open to trustees is one of interest, ior it' the trustee on trustees go outside the securities specified in tne Act they become personally liable to make good any loss. These limitations have been imposed to gunnel the interests of the beneficiaries under the trust, and years of experience by tnoseVwho are handling Hrust affairs has; shown that there is need tor some check on the nature of. the investments.

The Trustees Act is very definite on the matter, Section 95 of the Act says that, unless a .trustee is expressly lorbidden under the terms of the will o-i deed of trust, it is lawful for him to invest in Government debentures oi inscribed stock, first mortgages-, bond* or debentures of municipal corporations, county councils, water supply boards or river boards in New Zealand provided that such authorities have been given power to borrow money. Power is also given to put money on nxed deposit in banks .or on deposit in the Post Office Savings Bank. When not- otherwise required, trust moneys may be paid into such hanks on . current account. All these investments must be with any consent that is required by the trust deed or will. The Act also gives a further power to invest to up to one-third of the value of a lessee’s interest in certain Crown leaseholds but this prevision i> of no use to a private investor.

A business man who has had long experience' in. dealing with trustee affairs pointed out to a Christchurch reporter the other day that the Act did not entitle a trustee to invest money on second mortgages or in mortgage debentures which covered property that was already subject to a mortgage. He said that certain debentures had been offered to the public which 'were not described ais either first or second mortgage debentures but which were really second mortgage debentures.

“Investors who are not thoroughly familiar with debentures and bonds thus described should confer with their

bankers or shareholders, before risking their money,” lie said. “Many millions of pounds have been lost throughout the business world because investments were made when the public did not realise the full .significance o! their security.”

He instanced another form of bond which was hawked from door to door, and which could be described as nothing more than an 1.0. U. for it did not attach itself by way of mortgage to any specified piece of land. Another man who has a good deal to do with trusts confirmed these, statements. He instanced a case which had occurred in Christchurch, where trustees had advanced money on a security which had appeared to be perfectly sound. However, this did not prove to,lie the ease, and as «• result the

trustees had been compelled to pay the amount of the loss to the trust estate..