Provision of banking services
Which one of the following statements relating to the provision of banking services is not correct?
A The traditional business of a commercial bank is to accept deposits from, and make loans to, its customers.
B. Following banking de‐regulation in the US in 1999, investment banks have used their expertise in capital markets to diversify successfully into wealth management.
C A significant number of private banks also hold a licence(s) to carry out trust services in one or more financial centres.
D A private banking licence obtained from a respectable regulator that implements internationally acceptable standards (for instance, the Cayman Islands’ Monetary Authority) permits the holder to carry out trust services in or from any common law offshore financial centre
Question 2
Which of the following statements are accurate?
I While US stocks and bonds are regulated by US law, a non‐US person or entity, such as a BVI company, may nonetheless invest in the US stock market.
II Offshore banking refers to the deposit of funds by an individual or company in a bank that is located in the same jurisdiction as the depositor.
III It is not uncommon for family wealth to be held in trust in a popular offshore tax haven, but be managed by one of the full‐service wealth management firms in the City of London or Switzerland.
IV A sophisticated and wealthy retired business owner who is concerned about the preservation of his wealth for future generations of his family will typically be advised to make an inter vivos will in order to dispose of his wealth amongst his family members by way of fixed monetary gifts.
A I and III.
B I, II, and IV.
C II and IV.
D All of the above
Question 3
Which one of the following statements relating to the nature of a trust is not accurate?
A The trust concept is based upon an equitable obligation owed by the trustee to the beneficiaries.
B A trust can be created inter vivos or on death by will.
C Legal ownership of, or title to, the trust assets is held by the beneficiaries who must be named, described or identified in the trust instrument.
D Title to the trust assets is usually transferred into the name of an underlying company established for asset‐holding purposes and wholly owned by the trustee
Question 4 Which one of the following statements regarding the doctrine known as stare decisis (judicial precedent) is not correct?
A Under the doctrine, a court of law must follow the legal principles laid down and the decisions reached in prior cases.
B The doctrine of stare decisis permits a court of law to exercise a judicial discretion in the interests of fairness and equity.
C Equity permits the court of chancery to exercise a judicial discretion when adjudicating upon an issue in dispute in the interest of justice.
D Historically, the Court of Chancery generally ensures that a moral obligation is enforced as a matter of conscience and is not affected by the doctrine of precedent
Question 5 Which one of the following is not a recognised characteristic of an inter vivos trust?
A The trust assets constitute a separate fund in the hands of the trustee and do not form part of the trustee’s own property that vests in the court‐appointed trustee‐in‐ bankruptcy in the event of the trustee’s bankruptcy.
B Legal ownership of (or legal title to) the trust assets stands in the name of the trustee (or special purpose underlying company on behalf of the trustee).
C The beneficiaries have equitable rights in rem that are enforceable against the trustee and settlor to ensure that they comply with their core duties under the trust.
D The trustee is under a duty to hold and dispose of the trust property in strict accordance with terms set out in the trust instrument.
Question 6 Which one of the following statements regarding the creation of a valid trust is correct?
A A settlor must be sui juris and have the legal capacity to transfer the property to trustees, subject only to any prohibition of such transfer by the domestic law of the settlor’s country of habitual residence.
B A valid trust need not be in writing.
C When chattels are put into a trust by the settlor, it is necessary for the trustees to receive delivery of the assets and retain dominion and control over them at all times.
D If an individual trustee dies, the trust must be terminated by his executors and the assets distributed in the terms of the trust.
Question 7 Settlor transfers a nominal sum to Trustee to hold upon the terms of the XYZ Trust and intends to transfer additional property into trust in due course.
In regard to the transfer of the additional property into trust, which of the following statements is not correct?
A A patent registered in State A in the name of Settlor is transferred into trust by way of a deed of assignment that complies with the laws of the trust.
B The legal interest in fine art belonging to Settlor is transferred to Trustee by delivery.
C Real estate located in State B is transferred to Trustee by deed of conveyance if that is the method prescribed by the laws of State B.
D Shares of a private company incorporated in State C are transferred to Trustee by way of share transfer form, executed by the transferee and delivered to the registered office of the company with instructions to update the register of members.
Question 8 Settlor transfers a portfolio of shares to Trustee to hold upon trust for A for life, remainder to B absolutely.
Which of the following statements do you consider to be correct?
I B’s rights to the trust property are contingent upon him surviving A.
II If B dies before A, then on A’s death the trust property will return to the Settlor on a resulting trust.
III A has a right to the dividend income generated by the trust property for the duration of his life.
IV When A dies, B becomes entitled to all the accumulated income generated by the property during A’s lifetime.
V When A dies, B becomes entitled to the dividend income generated by the trust property for the duration of his life, and may dispose of such life interest by will.
A I and V.
B I, II and III.
C II and IV.
D III only
Question 9 Trust Fund is held by Offshore Bank for ‘such of AB’s children and remoter issue as Offshore Bank thinks fit, but if not wholly disposed of within the trust period, for the Red Cross of Geneva absolutely’. Which one of the following statements is correct?
A To be a member of the class of potential beneficiaries you have to qualify by being a legitimate child of AB.
B The Red Cross is a ‘sham beneficiary’.
C If funds remain in trust at the end of the trust period they revert to AB or his estate.
D The Red Cross is the ultimate default beneficiary
Question 10 You are consulted by a high net worth client, who is concerned about the volatility in his local economy. After an evaluation of the client’s needs you conclude that an asset protection trust is the most suitable structure to protect his wealth. Which of the following features should such a structure include?
I The settlor should reserve the power to revoke the trust.
II If the settlor wants to be a beneficiary of the trust, the trust should be discretionary, with the settlor being included in the class of beneficiaries.
III The trust assets should be held by the trustee in an offshore jurisdiction, rather than in the jurisdiction where the settlor resides.
IV The governing law of the trust should include legislation based upon the Statute of Elizabeth.
A I, II and III.
B II and III.
C II, III and IV.
D I, II and IV
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