Sator Fidelis - Protecting Protectors
Protecting Protectors is a new, breakthrough service designed by Sator Fidelis to deliver assurance for the Protector of a Trust that his responsibilities to the settlor and beneficiaries of the Trust are being properly fulfilled by the Trustee, and provide comprehensive evidence in support.
Protectors are frequently appointed to protect the interests of the principals behind complex and high value fiduciary structures, playing an increasingly important role in the private wealth landscape. The Protector may be a professional advisor to the family, a trusted confidante, or may be a member of the family without any specific background or experience of the issues they may encounter. A Protector has responsibilities and may have fiduciary obligations, with these come potential liabilities in the ever-increasingly complex and litigious world of private wealth.
Whatever the circumstances, Sator Fidelis can provide expertise and resources to help the Protector fulfil his responsibilities, by monitoring the activities and actions of the Trustees to confirm the Trust is being soundly administered, is meeting the purpose for which it was created, and that the beneficiaries’ interests are being served.
Drawing on their years of experience, the team at Sator Fidelis will review the management of the Trust to ensure the structure (including any underlying companies) is being properly governed and administered; that risks are identified and managed; and that assets are being preserved.
Sator Fidelis acts as the Trust’s private monitor, reviewing every element of the structure to ensure the settlor’s intentions and beneficiaries’ interests are being safeguarded – allowing the Protector, be he ‘lay’, family or professional, to be confident that his duties and responsibilities are being properly discharged, and any defects highlighted.
Sator Fidelis reviews will also be of interest to Enforcers of Purpose Trusts.
Scope of Review
The scope of the review would focus on those areas of key risk to the trust structure, and the interests of the beneficiaries. For an existing structure, the initial Fidelis review would normally cover all the areas of key risk. For subsequent periodic reviews, the scope would be slightly narrower, and would focus on activity since the last review.
A comprehensive outline of the normal scope of a review by Sator FIdelis will be discussed with the Protector before the start of the assignment. This includes, amongst other matters, whether comprehensive legal and tax advice has been taken and implemented correctly, how investments and other trust assets are managed, accounting and reporting, and exercises of trustee discretion. The management of conflicts of interest by the trustee is also within scope.
Two Propositions, two different depths of review
Sator Fidelis offer a choice of two different approaches – Assurance or Audit.
Under either service, a comprehensive report provides comfort to the Protector with regard to governance, risk, management and administration matters which he may not normally be able to access or evaluate, including often opaque issues such as conflicts of interest, retrocessions and other return commission, etc. The report will provide evidence for the Protector that he has fully considered all aspects of the trust.
Under the Assurance service, Sator Fidelis will compile and review a comprehensive file of key documents and information from the Trustee, obtained through the authority of the Protector to request information to enable him to fulfil his responsibilities. This review will consider all key risks and issues that could impact on the trust structure, and assess how effectively they have been dealt with.
The Audit service requires the engagement of the Trustee. Sator Fidelis is appointed under a tri-partite agreement with the Trustee and the Protector, to produce an independent fiduciary audit report to both the Trustee and the Protector. The Audit service comprises a more detailed and in-depth review of documents, processes, decisions and actions, by reference to the Trustee’s records and underlying transactions.
Under both services, a comprehensive written report is produced. The report will evaluate whether the operation of the structure is in line with the Trust Deed and any letters of wishes. The report will also highlight any matters which Sator Fidelis think the Protector should be made aware of, as well as any departures from generally accepted good practice.
Under the Audit service, the report also benefits the Trustee by providing independent oversight and quality assurance of the standard of administration by which the Trustee has run the Trust and underlying companies. the terms of appointment provides safeguards for the Trustee by providing a pathway to remediation of any issues that may be identified, reducing the likelihood of dispute and litigation in the future.
Both the Assurance and the Audit service would normally commence with a full review of the operation of the structure since its inception, which is followed up with a comprehensive written report. Once this full health check is completed, a periodic update review would normally be undertaken to ensure the continued effective operation of the structure, and that any remedial actions necessary have been effected. Sator Fidelis can also undertake a one-off review if required.
What will it cost?
Fees are charged on a time-spent basis, and will normally depend on the complexity of the structure. An estimate of the likely cost of each review is supplied in advance. These fees would usually be paid out of the trust as an expense of the Protector, always of course subject to the provisions of the Trust Deed.
Ordinarily, the relationship between a Protector and the Trustee should be positive and constructive, and Sator Fidelis will work within and support this. The review is designed to provide support and confidence that the objects of the trust are being met, the interests of the beneficiaries are being protected and that the standard of administration and management of the structure is appropriate. The retention of Sator Fidelis is not a ‘vote of no-confidence’ in the Trustee, and a competent, well-managed and well-controlled trust business should not resist the activities that Sator Fidelis undertakes.
How does the use of Sator Fidelis impact on other professional advisors?
Sator Fidelis does not give legal, tax or investment advice, and does not interfere with the roles and responsibilities of the various advisors involved in complex fiduciary structures. Sator Fidelis brings expertise in looking at the ‘nitty gritty’ of trust administration, helping the Protector satisfy himself that he is discharging his responsibilities, by maintaining a watching brief on the administration of the Trust. The experienced team at Sator Fidelis will engage and liaise with the various advisors as necessary based on the circumstances. It will be for the Protector to decide what action he may wish to take in response to Sator Fidelis’ findings in the Report. He may choose to refer matters raised to the advisor of the trust and / or family. It is noteworthy that under the Audit service, the tri-partite contract contains provisions for remediation, specifically precluding the use of the report as evidence in litigation for a prescribed period.
What if the Trustee will not engage with the Assurance or Audit process?
A Protector is entitled to take reasonable steps to obtain assurance that the Trustee is properly fulfilling its duties to the Trust and its beneficiaries. Competent, reputable Trustees should have nothing to fear from undergoing either the Assurance or Audit process. Should they decline to do so, the Protector may well wonder why the Trustees are unwilling to undergo the scrutiny, and will have to consider what options he has to scrutinise what the Trustee will reveal. The Assurance service processes are designed to work with what the Protector is entitled to insist on seeing.
One of the key powers of a Protector contained in many trust deeds is the power to replace the Trustee. Sator Fidelis can help a Protector undertake due diligence on potential new Trustees; reviewing their policies, procedures and control frameworks; identifying the background, qualifications and experience of the principals and key persons; the litigation history of the proposed Trustee; their financial stability; adequacy of insurance; complaint handling mechanisms and an overview of the protections available for consumers in the jurisdiction. Sator Fidelis can also assist the Protector if necessary in keeping a watching brief on the process of changing Trustee.