The Diocesan School Cayman investmentcontroversy invites consideration of what it is that a charity is and does. Registered charities receive tax concessions and commonly also receive donations and bequests. The donors may perceive a higher level of accountability or investment caution, as a result of that charitable status. However, that assumption (even if founded on the belief that the tax advantages counteract any need to take undue investment risk) can be misguided. The extent to which a charity must adhere to prudence is determined in the first instance, by its rules (commonly set out in a deed or declaration of trust or the rules of a society) rather than what society might expect. The common law and the relevant legislation can add a further overlay.
Importantly, any donor to any charity, should search the rules (for a registered charity these are available on the Charities Register) to ensure an appropriate governance and prudent investment standard.
Moving forward, many charities, notwithstanding their rules, will be subject to the default provisions of the Trusts Act 2019, which provides at s 30 (unless modified) that “When exercising any power to invest trust property, a trustee must exercise the care and skill that a prudent person of business would exercise in managing the affairs of others, having regard, in particular,—(a) to any special knowledge or experience that the trustee has or that the trustee holds out as having; and(b) the person acts as a trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.”
Trustee Act 1956
Trusts Act 2019