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Trust

Updated: Dec 15, 2022

Introduction


“Trust” means an obligation imposed on a person to hold or control and administer assets for the benefit of others (i.e. the beneficiaries) or for a specified purpose (e.g. charitable purpose, wills or estate planning); and


“trust business” means provision of one or more of the following services, by way of business:


(i) setting up a trust;

(ii) acting as a trustee (or a party by whatever name called performing the functions of a trustee) for a trust;

(iii) managing the assets held on trust;

(iv) administration services for a trust;

(v) eventual transfer of assets to beneficiaries.


For the avoidance of doubt, service (iii) above does not cover investment management of the trust assets by a licensed or registered person for Type 9 regulated activity under Schedule 5 to the Securities and Futures Ordinance (Cap. 571). For service (iv), non-exhaustive examples of one or more activities that will be taken into account in considering whether administration service for a trust is involved include keeping of accounting records relating to a trust and preparation of accounting records for a trust; custody of trust assets; and payment of expenses or remuneration out of a trust. However, as far as a collective investment scheme (“CIS”) as defined in Schedule 1 to the Securities and Futures Ordinance is concerned, service (iv) does not cover an activity the exercise of which is the responsibility of the management company of the CIS.


“Trust” refers to an obligation imposed on a person to hold or control and administer assets for the benefit of others (i.e. the beneficiaries) or for a specified purpose (e.g. charitable purpose, wills or estate planning). A.1.2.2 “Trust business” refers to provision of one or more of the following services, by way of business: (i) setting up a trust; (ii) acting as a trustee (or a party by whatever name called performing the functions of a trustee) for a trust; (iii) managing the assets held on trust; (iv) administration services for a trust; (v) eventual transfer of assets to beneficiaries.


For the avoidance of doubt, service (iii) above does not cover investment management of the trust assets by a licensed or registered person for Type 9 regulated activity under Schedule 5 to the Securities and Futures Ordinance (Cap. 571) (“SFO”). For service (iv), non-exhaustive examples of one or more activities that will be taken into account in considering whether administration service for a trust is involved include keeping of accounting records relating to a trust and preparation of accounting records for a trust; custody of trust assets; and payment of expenses or remuneration out of a trust. However, as far as a collective investment scheme (“CIS”) as defined in Schedule 1 to the SFO is concerned, service (iv) does not cover an activity the exercise of which is the responsibility of the management company of the CIS.


“Trust governing documents” means, in respect of a trust, the trust deed and any other documents setting out the general and specific terms governing the trust services provided or to be provided by a trustee to the trust.


“Relevant staff” refers to staff engaged by a trustee to provide direct assistance in the provision of trust business (including customer-facing staff, operations staff, and supervisors of such staff). Staff acting as an accountant for the overall book-keeping at the corporate level, providing human resources, general secretarial or administrative support or information technology support at the corporate level, or performing legal, compliance or risk control function are not regarded as relevant staff.


Background


Hong Kong is a premier asset and wealth management centre. Hong Kong attracts and provides services in asset and wealth management, including those for high net worth individuals and family offices. Among others, trust, as a means of protecting assets and controlling how they are used, is an important tool for managing wealth. Protection of client assets held on trust is thus paramount.


This module includes anti-money laundering and counter-financing of terrorism requirements, which are set out in the applicable statutory and regulatory requirements including the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615).


The trust business services subject to the Code are those provided by a trustee or prospective trustee (or a party by whatever name called performing the functions of a trustee) of the trust concerned.


Appointment of managers and responsible officers


A trustee should appoint (a) manager(s) in respect of section 72B of the Banking Ordinance (Cap. 155) to be principally responsible (alone or with others) for the conduct of its trust business under different lines of business (e.g. retail banking, private banking, corporate banking, or other business which is material to the [institution]). The AI is required to comply with the HKMA’s Supervisory Policy Manual CG-2 on Systems of Control for the Appointment of Managers ("SPM CG-2”) which sets out, among others, the fit and proper criteria and the respective controls to ensure fitness and propriety of individuals appointed as managers, and notification requirements and timeline to the HKMA.


Trustee


Bestar has put in place proper arrangement to handle incidents (e.g. disruption of services, data leakage), including notifying any impacted customers and safeguarding customer interests.


Management and control of trust assets


A trustee should exercise due care in understanding, managing and controlling all assets held within the trust in full conformity with its fiduciary obligations.


Corporate governance and internal controls


A trustee should establish a proper corporate governance structure and implement adequate internal controls and risk management systems to ensure that its trust business is effectively managed.


Fairness, honesty and integrity


A trustee should, subject to the duties and obligations conferred by the trust governing documents, not attempt to avoid its responsibilities under the Code and any other applicable requirements and standards.


Subject to the terms of the trust governing documents and its legal and fiduciary obligations applicable from time to time, a trustee should act fairly and objectively when dealing with customers. In particular, a trustee should:


(a) act in accordance with the objects of a trust and work within the parameters and terms set out in the trust governing documents and/or any directions from a relevant party where permitted, in accordance with applicable requirements and standards;


(b) treat its customers fairly at all stages of the relationship, while having regard to its legal and fiduciary obligations; and


(c) provide advice where required and appropriate to its customers and exercise independent professional judgement in performing its duties, including the appointment and oversight of delegates and other service providers performing services for the trust e.g. investment managers.


Disclosure of information


Where appropriate and permitted under applicable laws and regulations and subject to the terms of the trust governing documents, a trustee should:


(a) ensure that a customer has access to relevant and updated information concerning that trust; and


(b) make adequate and accurate disclosure of relevant information to help customers make an informed decision prior to entering into any contract or agreement (for example, key risks, terms and conditions, fees and charges).


Fees and charges


A trustee should ensure that fees and charges in relation to a trust are fair and reasonable.


Unless restricted by the terms of the trust governing documents, a trustee should be open and transparent with customers about fees and charges, for example:


(a) prior disclosure of and agreement on fees and charges, and documentation of the basis for such fees and charges;


(b) prior disclosure, where practicable, of benefits received or receivable associated with the trust service provided from parties other than the customers;


(c) disclosure of the manner by which fees and charges will be collected;


(d) giving adequate notice before introducing any change in fees and charges; and


(e) disclosure of the arrangement of fees and charges in relation to the termination of services, such as whether fees paid in advance are refundable in the event of termination.


Prompt execution


A trustee should take all reasonable steps, having obtained sufficient information in order to exercise properly its discretion or other powers, to consider and deal effectively and in a timely manner with requests from its customers, including the establishment, transfer or closing of business relationships.


Acting in the interests of customers


A trustee should have a complete and updated understanding of the trust governing documents in each case, and seek legal or other professional advice where necessary.


When a trustee exercises power or discretion in relation to a trust (such as the power to invest, manage or arrange for investment), it should act with due care and attention to ensure that it suitably exercises such power or discretion. For example, a trustee should:


(a) act responsibly on any available information considered by the trustee to be relevant and appropriate; and


(b) exercise power or discretion properly in accordance with the objects and terms set out in the trust governing documents and applicable legal and regulatory requirements.


Management and control of trust assets


Ownership and entitlement of trust assets


A trustee, where managing the assets of a trust, should act in accordance with the terms of the trust governing documents, the directions of the trust parties subject to the trust governing documents and applicable legal and regulatory requirements.


A trustee should exercise care in safeguarding those assets held on trust within its control. Where physical assets in this respect are held, physical storage should be secure.


Adequate procedures should be effectively implemented to minimise the risk of loss, theft, fraud, and other acts of misappropriation. Proper records should be maintained in respect of assets within the trustee’s control to evidence their registration and good title where available and security as appropriate and to ensure their availability for distribution in accordance with the trust governing documents and/or trustees’ exercise of its discretion. Proper audit trails should be created to evidence the receipt, delivery and other movements of assets.


Segregation of trust assets


A trustee should ensure assets held on trust are clearly identified and segregated from one another and from the assets of the trustee and any delegates or other parties involved in the operations of the trust.


Reconciliation of trust assets


Regular reconciliation of client monies and where practicable other assets held on trust against the trustee or third-party records, and where practicable verification of asset ownership, should be conducted by staff of the trustee operationally independent of the regular management and administration of the trust and be subject to periodic review and approval by appropriate management staff. For physical assets, commensurate with the prudent and effective exercise of trustee’s duty, periodic audits should be conducted at the premises where the physical assets are kept.


Confidentiality


In accordance with confidentiality obligations conferred by the provisions of the trust governing documents and relevant personal data privacy legislation in force, a trustee should implement appropriate policies, procedures and controls on collection, use and transmission of trust related information and collection, use, storage, protection, transmission and destruction of personal data.


Staff are required to hold in strict confidence all trust related information and personal data the trustee has collected or obtained from persons related to trusts (e.g. settlors, protectors, enforcers and beneficiaries). A trustee should not disclose such information to third parties unless required or permitted by applicable legal and regulatory requirements and the trust governing documents; where the trustee needs to seek advice under legal privilege or other necessary professional advice; where the trustee must disclose to discharge the trustee’s duties or where consent is given by the person concerned. An institution should take all necessary steps to safeguard the confidentiality of trust related and personal information, including formulating internal policies for the collection, use, storage, protection, transmission and destruction of confidential data.


Internal controls on managing and administering the trust


A trustee should implement adequate procedures and controls in managing, administering, and overseeing, as applicable, the operation of the trust. Examples of these controls include cashflow monitoring, investment monitoring, safekeeping and valuation of assets, trust accounting, receipt and distribution of payments and assets, where applicable and in accordance with the trust governing documents together with all applicable legal and regulatory requirements.


A trustee should ensure it has in place an adequate business continuity plan and procedures to handle potential disruptions, failures, and other contingencies for its trust business activities. A trustee should also establish an appropriate contingency plan for the appointment or engagement of delegates and other parties.


Complaint handling


A trustee should implement adequate policies and procedures for handling complaints lodged by customers or a third party on behalf of customers related to its trust business.


(a) Policies and procedures should cover receiving complaints, investigation of complaints, responding to complaints, and availability of any redress or compensation in appropriate circumstances.


(b) Complaints should be handled, investigated and addressed in a fair, prompt and appropriate manner. Staff assigned to handle the complaint should be independent and should not be involved in the subject of the complaint.


(c) Details on where and how to lodge a complaint should be communicated and made available to customers. (d) Records of complaints should be maintained which show the complainant’s name, details of the complaint, assessment result, correspondence between a trustee and the complainant, and any actions taken.


A trustee should set up effective procedures to monitor complaints and prepare regular reports with complaint related data to the senior management for review.


Accounting and other record keeping


A trustee should maintain adequate records and adequate internal controls of its records to demonstrate compliance with the Code, other applicable legal and regulatory requirements, and trust governing documents.


Professional indemnity insurance


A trustee should maintain professional indemnity insurance with adequate coverage that is commensurate with its trust business to cover claims for liability related to its duties and obligations in the course of conducting trust business. Coverage may be taken at the entity or group level, so long as it is adequate.


Compliance function and review


Commensurate with the scale, complexity and risk profile of the trust business, the compliance function should be appropriately independent of business functions, and report to senior management directly. It should have unfettered access to all business and supporting units, as well as documentation, records and information necessary to properly discharge its roles and responsibilities.


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Five Core Advantages

Over A Century Of History

/ Hong Kong Trust has a long history of over 100 years without a single case of collapse or bankruptcy of the trustees in the territory during the period.

Hong Kong Is Benefited By The Advantages Of International Financial Centre

/ As an International Financial Centre in Asia, Hong Kong is a hub of wealth management.


/ Hong Kong has global vision, rich financial market information and diversified trust products.


/ Hong Kong has sophisticated banking service, no foreign exchange control.


/ Rich expertise in financial service


Sophisticated Legal System

/ Given a long history of over 100 years, Hong Kong Trust Law is comprehensive and sophisticated.


/ Once a trust plan is set up in Hong Kong, the asset in the trust account will be protected under the law of Hong Kong and free from interference of foreign jurisdiction regardless of the nationality of the settlor.


/ As registration is not required for Hong Kong trust, the privacy of settlor is thus effectively secured.


/ 「Hong Kong Privacy Ordinance」 protects the privacy of settlor’s personal data. Trustees will not disclose such information to any country, authority or institution under the Ordinance.


Sound Supervision by Hong Kong SAR Government

/ Trustees registered in Hong Kong are under the direct supervision of the Financial Secretary of the Hong Kong SAR Government.


/ The operation of Hong Kong trustees is under the supervision of various authorities such as the Financial Secretary of the Hong Kong SAR Government, Securities and Futures Commission, Hong Kong Federation of Insurance simultaneously depending on the asset involved in the trust.


The Trust Account of Hong Kong Is Permanent

/ The trust account of Hong Kong is valid permanently whereas there is an expiry of trust account in most Common Law jurisdictions (e.g. Malaysia - 80 years; Singapore - 100 years; United Kingdom - 125 years). So, Hong Kong Trust can provide asset safety, capital growth and inheritance of legacy without a time limit while the trust of other jurisdictions provides the same service in a limited period of time.


Features of Hong Kong Trust Law


01 Stronger Protection For Beneficiaries

  • New amendment provides better protection to beneficiaries and their interests.


02 Hong Kong Trust Is Perpetual

Hong Kong trusts have no expiry. Alternatively, settlors can still choose to specify a fixed trust period – a feature that only few trust jurisdictions can offer.


03 Hong Kong SAR Government Is Stable

  • China’s “One Country, Two Systems” policy for Hong Kong is enshrined in the Joint Declaration between Britain and China.

  • Hong Kong itself has a Bill of Human Rights and is a signatory to most major international conventions on human rights.

  • It has a stable political environment and a long tradition of respecting property rights.


04 Sophisticated Judiciary Of Hong Kong

  • Hong Kong is an attractive jurisdiction from which to administer trusts, with a judiciary experienced in trust law and professionals experienced in private client and public trusts wealth management services. This ensures a high level of confidence in the legal framework, competitive pricing and the protection of assets

  • Hong Kong’s legal system is based on the English common law. Hong Kong’s trust legislation originated in 1934 and is based on English trust law.

  • Hong Kong has sophisticated trust law based on the English Common Law. Courts in Hong Kong continue to follow and apply the case law and judicial precedents of Commonwealth countries. This ensures high level of confidence in settlors.


05 Enhancement Of Trustee’s Default Power

  • When there is no trust deed, trustees may rely upon the default power of trustees stated in Trust Ordinance to provide trust service.


06 English As Business And Legal Language

  • English is the major business and legal language, used alongside Chinese for doing business in the Chinese-speaking countries of the Asian region. English is widely used in commercial contracts and the judiciary of Hong Kong.


07 Forced Heirship Protection

  • The forced heirship of a foreign jurisdiction is not applicable to the assets in the Hong Kong Trust.


08 A Major Financial Centre

  • Hong Kong is one of the three major international financial centres in the world, along with New York and London.

  • Hong Kong has access to a wide range of world class banks and has one of the world’s major stock exchanges.

  • Hong Kong is a party to a wide range of international Tax Treaties.


09 Sophisticated Investment Infrastructure

  • Availability of a large pool of investment expertise.

  • It is the major centre for investment funds, innovative investment vehicles and IPO’s in Asia, well supported by professional trustees and fund services providers.

  • Hong Kong is strategically and geographically positioned to take advantage of the enormous growth prospects in Asia in the coming years.


10 International Business And Investment Hub

  • Hong Kong is the gateway to China and the hub of international business in Asia.

  • Hong Kong has one of the best international airports in the world linking up your home and us.


11 International Standard Professionals

  • Hong Kong has a pool of professionals in the financial service area such as trust service, accountancy, banking, investment, legal counselling, etc.



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bestar


Bestar conducts trust business in Hong Kong.


Appropriate advice should be sought where precise interpretation is required.


Against this backdrop, Bestar protects client assets held on trust; treats customers fairly and promotes customer-centric culture. This would in turn enhance clients’ confidence in entrusting assets to trustees in Hong Kong, thereby reinforcing Hong Kong’s position as a leading asset and wealth management centre.







https://www.legco.gov.hk/yr12-13/english/ord/ord013-13-e.pdf




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