Transcript Fishing Lake 1907 Surrender Trust Agreement Trustee Options

Fishing Lake 1907 Surrender
Trust Agreement
Trustee Options
Community Meeting
Fishing Lake Reserve – August 16, 2014
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New Structure for Trust – Financing vehicle
First Nation
Responsibility
Band
Settlement
Account
Community decides
what to do with funds
Uses & decision making
need to be addressed by
the First Nation
Trustee
Responsibility
Trust Account
Annual Payment
Investment
Amount Can’t be
Spent
• Another Trust
• S. 83 Expenditure By-law
• Financial Policy
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Role of Trustee under New Structure
• The role of the Trust is limited to
• Receiving the monies
• Investing the Trust Property
• Making an annual payment to the First Nation
• Possibly using the Trust Property to secure loans for the First Nation
• The Capital is not spent
• Capital Invested to generate income which is used to make the annual
payment
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Role of Trustee under New Structure
• The Trustee has no role in determining how funds are spent in the
community
• The decision to determine how to spend the annual payment is left
to the Chief and Council and the Members
• will be addressed separately – more work to be undertaken
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Trustee - Options
• The First Nation has the following options:
• Individual Trustees
• Corporate Trustee - a Trust company, duly licensed to act as a Trust company
• Combination - some combination of individuals and Corporate Trustee
• Individual or Corporate Trustee with a Protector
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Individual Trustees
• Individual Trustees can be:
• Members of the First Nation
• Person independent of the community - possibly with certain types of
expertise (Accountant, Lawyer, Banker, Investment Advisor)
• Some combination of members and independent people
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Corporate Trustees
• Corporate Trustees are
• Corporate entities that are licenced under Canadian law to provide Trust
service, including acting as Trustee
• Have professionals that are specifically trained to provide trust services
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Combination of Individual and Corporate
Trustees
• Can have a Corporate Trustee along with Individual Trustees
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Protector
• Can have a Corporate Trustee or an Individual act as a protector or
“gatekeeper”
• Not a Trustee but ensure Trustees are following the terms of the Trust
Agreement
• This is how the current Fishing Lake 1907 Trust is structured
• Seven Members of the First Nation are the Trustees
• Peace Hills Trust is acting as the Protector
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Advantages and Disadvantages of Each Option
• There are advantages and disadvantages of each of these options
• The First Nation will need to carefully consider these options and the
advantages and disadvantages of each
• The Chief and council and the Trustees have considered these
options and the advantages and disadvantages of each are bringing
this matter to the members for their consideration and advice on
which option to use
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Advantages and Disadvantages of Each Option
• Asset Custody:
• The Trust Property – Trust Account, Investment Instruments, etc. need to be
held somewhere
• A Corporate Trustee has the legal qualifications to act as custodian of the trust assets
• This service is generally included in the Corporate Trustee’s fees
• If only individuals are used as the trustees then a separate entity will need to be retained
to hold custody of the trust assets
• There is an added cost to the Trust for this service
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Advantages and Disadvantages of Each Option
• Knowledge and Experience:
• Corporate Trustees have wide ranging managerial experience with trusts
• The Professionals working for a Corporate Trustee have specialized training
• They understand the laws applicable to Trusts and have a working knowledge of such
laws
• Are able to effectively communicate these principles the community
• Individuals often have limited experience in the operation of a Trust, Trust
laws, the handling of investments and trust accounting
• Band members may have difficulty communicating trust concepts to the members of the
First Nation
• Other individuals may not have this same difficulty depending on their expertise
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Advantages and Disadvantages of Each Option
• Administration and Reporting:
• Corporate Trustees have computerized systems in place to handle timely
collection of all investment income and authorized disbursements as well as
full financial reporting on all activities of the trust
• These services are included in the Corporate Trustee’s fees
• In the case of individual trustees, such systems will need to be put in place or
a third party retained to provide these services
• There will be an added cost to the Trust for such systems or for the services
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Advantages and Disadvantages of Each Option
• Objectivity:
• Corporate Trustees do not have any political or family connection to the First
Nation
• Able to remain neutral concerning all decisions
• Members of the First Nation who are trustees can face pressure within the
community and are often criticized
• It is often easier for a Corporate Trustee to say “no” then it is for a trustee
who is a member of the community
• Such problems do not necessarily arise when a person independent of the
First Nation is a trustee
• A potential area of conflict of interest may arise if a Corporate Trustee is also
the investment manager for the trust.
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Advantages and Disadvantages of Each Option
• Language/Communication:
• It can be important to have community members as trustees - to ensure that
information and reporting can be provided to the members of the community
in their first language, if needed
• Member trustees can also better understand the needs of the community
and the impact specific decisions would have on the community
• They are also available to their members to hear their concerns and
questions
• Corporate Trustees and Individuals, who are not members, are not always as
available to the community members
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Advantages and Disadvantages of Each Option
• Decision Making:
• Conflicts and pressures within the community can sometimes make member
trustees’ decisions difficult
• Conflict of interest problems can also arise with member trustees, because of family
relations
• These same types of conflicts do not exist with a Corporate Trustee
• This is also so for an individual who are independent of the community
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Advantages and Disadvantages of Each Option
• Capacity Building:
• Including Members in the role of trustee can provide an important
opportunity for on-going capacity building for the First Nation
• The members who act as trustees learn new things, become more knowledgeable, which
can also be past on to other members making the community generally more
knowledgeable
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Advantages and Disadvantages of Each Option
• Training:
• Corporate Trustees do not require initial and on-going training, education,
and hiring of administrative staff
• Corporate Trustees can provide training workshops to help new trustees or members of
council and/or other members of the First Nation learn more about their trust and how it
works
• Members who are trustees generally need to have on-going training and have
administrative staff
• There is an added cost to the Trust for this
• Depending on the experience level of individuals who is independent of the
community, they may be able to provide some of this type of training
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Advantages and Disadvantages of Each Option
• Costs:
• For the type of Trust being considered a Corporate Trustee’s costs can be far
less expensive when all of the costs are considered
• By the time all the costs of operating a board of trustees are considered, such
as honorariums, travel costs, administrative costs, professional fees, training
costs, costs for staff and other related costs, the flat fee charged by a
Corporate Trustee is considerably less
• Historically the Fishing Lake 1907 Trustees have been spending on average 1.5% of the
value of the Trust Property each year to operate the Trust
• With using only a Corporate Trustee the costs to operate the Trust will be around 0.5%
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Advantages and Disadvantages - Summary
Asset Custody
Sole Corporate Trustee
Experience
Reporting
Member Trustees
Objectivity
Communication
Decision Making
Independent Trustee
x
x
x
x
x
Capacity Building
Training
Cost
x
x
x
x
x
x
x
x
x
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Decision on Trustee Option
• Normally with the type of Trust being considered by the First Nation
a Corporate Trustee is generally used
• Every few decisions need to be made
• Keep the costs for operating the Trust to a minimum so that there is more
benefits going to the community
• Can also consider some combination of a Corporate Trustee and
individuals, with the Corporate Trustee acting as a Trustee or as a
Protector
• With either of these options there will be added expenses to operate the
Trust
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Decision on Trustee Option
Questions
And
Discussions
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