Fiduciary duty is the legal responsibility to act solely in the best interest of another party. Trustees have a legal obligation to maintain trust with the members of the scheme they own and govern.
The two main duties are Duty of care; The duty of care requires trustees to use due diligence to get thorough information before making a decision that could impact the scheme members. Duty of loyalty; This requirement means that trustees work in the interest of the members of the scheme and not for their own gain.
Problem: Trust Deed and Rules (TDR) documents have personal representative roles assigned to the named trustees. Personal representative and trustee are used interchangeably. This implies that a trustee will be held responsible for decisions they make during their tenure and even long after they vacate office. If legal action is brought against a past or present trustee then their property and estate can be attached in case of judgement against them.
Solution: There are diverse forms of indemnity insurance overs in the Kenyan market. Trustees can get a specific pension trustee liability insurance that gives a retroactive cover that covers even retired trustees of the scheme.
Three steps to freedom: Engage a capable pension risk advisor. Review the current insurance to see that is meets the basic threshold; namely retroactive coverage and extension of cover to your Estate, Heirs and Jointly owned investments. Align the indemnity insurance with the risk exposure of the trustees as personal representatives of the members assets.
Negative stake: RBA Tribunal has recorded numerous complaints lodged against trustees. Most of these have been resolved via mediation. It will only take one member who’s relative may be the senator from Busia to put trustees in a difficult position.
Positive stake: The risk of current or future legal action can be mitigated with a pension trustee liability insurance. The cost of purchasing the cover is an allowable expense for the scheme. Trustees should consider a cover that includes extensions like theft, fraud or dishonesty and even computer crime.
Testimonial: There was a case where trustees who had vacated office were ordered by EACC to refund money that had been deposited into a real estate investment. This issue could have been covered by a retroactive cover with an extension clause for retired trustees.
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