Trustee accountability and transparency in Indigenous settlement trusts

Many First Nations have recently settled their agricultural benefits claim or are in the process of negotiating a settlement right now. How can they protect their settlement monies and ensure they benefit their communities for generations to come? One of the ways they can do this is to create a trust.

What is a trustee? What are their duties?

In connection with the creation of an Indigenous settlement trust, the First Nation can appoint one or more trustees to manage and administer the trust. Many First Nations are now choosing to appoint a regulated and insured corporate trustee.

Importantly, a trustee has a fiduciary duty – this is one of the highest duties imposed at law. As part of its fiduciary duty, the trustee must manage, administer and invest the monies in the trust in accordance with the trust agreement and applicable law. The trust agreement sets out the rules for the trust and is typically voted on by the First Nation’s members in connection with the settlement. For more information on trust agreements, please see our past Insight, Creating Intergenerational Wealth for First Nations: Indigenous Settlement Trusts.

In addition to complying with the trust agreement, the trustee has a duty of care and must also administer the trust in good faith and in accordance with its purposes. The trustee also owes a duty of loyalty, meaning that it must act in the best interests of the First Nation beneficiary and avoid all conflicts of interest. Equally important is the duty to account for all of the monies held in trust for the First Nation beneficiary.

How can a First Nation ensure transparency and accountability?

For Indigenous settlement trusts, the trust agreement can include a number of provisions to help ensure transparency and accountability with respect to the trust.

For example, the trust agreement can require the trustee to prepare an annual report for Chief and Council and members. The report may include details regarding the value of the trust property, a summary of all deposit and disbursement activity, an evaluation of the performance of the trust’s investments and any other information requested by the First Nation. The trust agreement can also require the trust’s financial statements to be audited annually. The First Nation may also choose to post the trustee’s annual report and the trust’s audited financial statements for members.

For Indigenous settlement trusts, it is also common practice for a First Nation to hold annual community information meetings for members. At this meeting, the trustee can attend and present the trustee’s annual report and the trust’s audited financial statements. There can also be a requirement to report on how the annual payments were spent and how they benefited the First Nation and members collectively. An investment professional can also be required to attend and explain the trust’s investment portfolio performance. Members may also ask questions about the trust. Enforcement mechanisms can be built into the trust agreement to provide assurance that all reporting obligations will be taken seriously.

The First Nation beneficiary of a trust has a right to hold the trustee to account for its administration of the trust property and to enforce the terms of the trust. Importantly, a trustee’s duty to account includes the obligation to maintain accurate and complete records of all trust transactions.

These transparency and accountability provisions allow the First Nation, including Chief and Council and members, to understand and to stay informed about the trust, as well as to keep a close watch on how the trust monies and annual payments are being managed, administered and spent.

MLT Aikins has extensive experience advising on Indigenous settlement trusts, including accountability and transparency provisions. If your First Nation would like assistance in developing a trust agreement, please do not hesitate to contact Anna Beatch or Josh Morrison, both members of our Indigenous Practice Group.

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