Our people say many things.
“Before you kill a dog, you must first ensure it receives a bad name.”
The reasoning behind this proverb is that one who has received a bad name loses any moral ground to defend themselves and thereby attract sympathy.
Nowhere is this saying truer than in politics.
Only recently, Nigerians watched as a Chief Justice of Nigeria was linked to allegations of misappropriation of funds and then removed from office. His subsequent attempts to fight the charge were unable to garner much support because he had already been given a bad name. While many Nigerians are torn about the propriety of the removal of the former Chief Justice of Nigeria, we are more concerned with what he could have done to protect his reputation. He could have set up a Blind Trust.
WHAT EXACTLY IS A BLIND TRUST?
Think about it this way. A Blind Trust prevents conflict of interest and guards against any and all allegations of corruption.
A Blind Trust is established by the asset owner (Settlor), who gives another party (the Trustee) full control over the assets listed in the Trust, for the benefit of certain beneficiaries (which can also include the asset owner themselves). In a Blind Trust, the Trustee has full discretion over the assets and investments and is also fully responsible for managing the assets and any income generated in the Trust.
Other than the right to terminate the Trust after leaving public office or at any time they wish, the asset owner otherwise exercises no control over the actions taken within the Trust, nor do they receive any report from the Trustee until when the Trust is to be dissolved.
Did we just advocate handing over assets with no say in how they will be administered?
Yes, we did. But as usual, we can explain.
In the next section of this article, we have prepared a thorough description of the strict regulations that govern the actions of Trustees administering Blind Trusts. However, it is still important that a public office holder take care to select a Trustee that has earned confidence through an excellent track record.
That said, a key benefit of removing total control from the Settlor of a Blind Trust is that it shields the asset owner from any form of conflict of interest or any allegation that public office was used for private benefits.
WHAT ARE THE FIDUCIARY OBLIGATIONS OF THE TRUSTEE?
By nature, a Blind Trust imposes the strictest duty of care on a Trustee. Here, we can come to understand the details of such duties.
Duty to Properly Invest Assets
To safeguard the Settlor’s assets, the Trustee of a Blind Trust must ensure that the assets in the Trust are invested in accordance with Section 2 of the Trustee investment Act. This Act regulates the portfolios in which Trustee can invest, most of which are low risk portfolios.
Duty not to deplete the Assets
All concerns of losing asset value through a Blind Trust are removed by the regulation that the Trustee cannot deplete the assets of the Trust, and must periodically account for all investments to the regulatory body (the Securities and Exchange Commission, SEC) under Section 13 of the Investment and Securities Act.
Duty to Separate Trust Accounts
The Trustee is mandated to maintain a separate account for every client, under Section 40 of the Investment and Securities Act, which means that it cannot co-mingle its accounts with that of the client.
This advantage ensures that should a Trustee Company be dissolved for whatever reason, the Trust assets in its custody can be easily moved to another Trust Company without any form of liability on the Settlor of the Trust. Section 42 of the Investment and Securities Act specifically imposes a penalty on any Trustee who draws money from the Trust assets to settle debts or other expenses.
Duty of Utmost Care and Diligence
To ensure absolute accountability, the Trustee is personally liable for failure to exercise the degree of care and diligence required when administering assets in a Trust. Any provision which can indemnify a Trustee from breach of this Trust is rendered void under law (Section 168 of the Investment and Securities Act).
Duty to Permit Periodic Inspection by Regulatory Body
Section 172 of the Investment and Securities Act gives SEC the power to periodically inspect and investigate the Trustee with respect to any portfolio under its management. The implication of this is that the Trustee is naturally held to the highest possible standards of conduct.
Duty to Maintain Proper Records
To prevent any form of foul play, the Trustee has a strict duty to ensure that records are properly kept. The legislation for this dusty is contained in Section 181(1)(h) of the Investment and Securities Act.
Now that the safety of Blind Trusts has been established, the public officer need only consider one more reason to ensure that their assets and integrity are protected via a Blind Trust.
DECLARATION OF ASSETS FOR PUBLIC OFFICE HOLDERS
Simply put, anyone in public office who does not protect their assets in a Blind Trust is sitting on a ticking time bomb.
To prevent corruption and abuse of office, the 1999 Constitution of Nigeria was amended with some key provisions on the declaration of assets by public office holders.
As provided under paragraph 3(c) of the Third Schedule, Part 1 of the 1999 Constitution of Nigeria, the Code of Conduct Bureau is allowed to make the asset declarations of public officers available for inspection by any citizen of Nigeria.
This implies that should there ever be any allegations of corruption or impropriety against a public office holder, he or she would be required to try and establish the absence of conflict of interest between the office and any private business, failing which strict penalties would be imposed.
In a real-life example, the Lagos-based rights group, Socio-Economic Rights and Accountability Project (SERAP) in Suit Number FHC/ABJ/CS/65/2020 (filed before the Federal High Court), demanded that President Muhammadu Buhari, Vice-President Yemi Osinbajo and all State Governors of the Federal Republic of Nigeria make public their assets and property income since assuming office.
It is difficult from a legal and democratic standpoint to see how the courts will deny their request. Without the existence of Blind Trusts, it is also difficult to see how public office holders will be able to defend their reputations against allegations of corruption arising from any increase in their financial standing since assuming office.
It is expected that the trend of requiring public office holders to declare the state of their assets before, during and after office will only continue to gain momentum and may spell political death for any public officer whose reputation may be tainted during the process.
A Blind Trust creates a trustworthy shield against unwarranted prosecution by ‘separating’ the politician from any trade, investment or transaction connected with private business during their tenure in office.
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NB: For more details on creating a Blind Trust, visit UTL Trust Management Services Limited at here