The Trustees and Custodians play an important role in the governance of unit trusts. How? Usually, the Trustee or Custodian is usually a public company, a bank, or an insurance company registered either under the company’s act or the society’s act. These entities must prove to be of good standing and be equipped to carry out their duties.
The Trustees and Custodians are required to be independent and cannot be a subsidiary or holding company of the Asset Manager.
An important function of the trustee and the custodian is to ensure the separation of portfolio assets from those of the fund manager. The trustee and custodian act as a caretaker of all cash and securities, holding these on behalf of investors. Further, they ensure that the unit trusts are run in accordance with the signed deeds of the scheme and in terms of the requirements of the Act.
Other responsibilities include but are not limited to the following:
- Ensuring that cash flows and portfolio assets are transferred timeously whenever transactions take place.
- Ensuring that participatory interests are priced correctly on the sale and repurchase of units.
- Make sure that the legal entitlement of investors to portfolio assets is assured.
- Verify that income accruals are dealt with correctly.
- Preparing an annual report regarding the correct administration of the fund, ascertaining reasons for non-compliance, and setting out steps to be taken to rectify any breaches.
- Ensuring that appropriate internal controls are in place to keep track of the nature and value of all portfolio assets.
Licensing of any unit trust is only possible once the deed is in place. Further, the fund manager, trustee, and custodian must have been appointed and signed off the trust deed. Investors are required to take a keen interest in the operations of these governance arms of the unit trust