POWER OF ATTORNEY
Synopsis: A recent article in the Times suggested that discretionary fund managers are refusing to accept instructions from attorneys. In this article we explore the extent of an attorney’s ability to delegate their authority.
Date posted: Monday, June 22, 2015
An article in the Times this weekend alleged that discretionary fund managers are routinely refusing to accept instructions from attorneys acting under a lasting or enduring power on the basis that attorneys do not have power to delegate – thereby forcing attorneys to close investment accounts to the financial detriment of the account holders.
It is a basic principle of the law of agency that an attorney cannot delegate their authority. Such a duty is imposed because of the discretion and trust reposed in the attorney(s) by the donor.
However, there are exceptions to this general rule and, like any other agent, an attorney acting under an LPA has an implied power in certain circumstances to delegate:
- any functions which are of a purely administrative nature and do not involve or require the exercise of discretion
- any functions which the donor would not expect the attorney to attend to personally, or
- through necessity or unforeseen circumstances (although caution should be exercised before relying on this exception)
This position is reinforced by the Mental Capacity Act Code of Practice which states at 7.62 that ‘in certain circumstances, attorneys may have limited powers to delegate (for example, through necessity or unforeseen circumstances, or for specific tasks which the donor would not have expected the attorney to attend to personally)’.
Assuming then that a donor would not be expected to personally attend to the management of an investment portfolio, this would suggest that an attorney does in fact have the authority to delegate investment management to a discretionary fund manager (DFM) and that any DFM who does refuse to act on the instructions of an attorney is misguided.
Even if the duty not to delegate is strictly interpreted, it is clear that it is possible for a donor to expressly authorise an attorney to delegate an investment (or indeed any discretionary) function and in cases where this is important to the donor, this may therefore be a prudent measure.
As reported in our earlier bulletin here, poor levels of understanding of LPAs among professional groups is rife and the Government has recently accepted the recommendation of a House of Lords committee that public and private sector bodies should be ‘educated’ to address this. This initiative may go some way to alleviating the problems that are reported as being experienced by some attorneys in relation to the delegation of investment function.
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