Chapter 20 - § 20.14 • ADVISORS

• Jurisdiction: Colorado

§ 20.14 • ADVISORS

If the instrument under which the representative acts gives a third party a power to control his or her conduct with regard to investments or any other matter, the representative must first determine whether such power is held by the advisor in a fiduciary capacity or whether the power is personal and for the benefit of the holder. In the former case, the representative must apparently act in accordance with the directions of the holder of the power or decline so to do, more or less at his or her peril, depending on whether the holder of the power is acting in good faith and in accordance with his or her fiduciary duty. If it appears that an abuse of the power is being committed, it is the duty of the representative to seek the aid of the court. This area constitutes one of the most difficult ones in the whole field of fiduciary activities and frequently raises the practical question whether one should qualify as representative in a situation in which such a dilemma can arise.²⁶ A difficult question of interpretation frequently arises as to the proper conduct of the representative when the advisor or holder of the power is incapable of acting — should the representative act on his or her own responsibility, do nothing, or take some other course of action?²⁷ The Legislature has clarified the position of trustees with regard to advisors, but it does not specifically include representatives in its provisions. C.R.S. § 15-16-306. C.R.S. § 15-1-307 basically provides that when an instrument under which a fiduciary is acting excludes him or her from exercising investment authority, the excluded fiduciary is not liable, either individually or as a fiduciary, for any loss resulting from the making or retention of any investment pursuant to the third-party direction.

See also the discussion in § 20.5 regarding the delegation rules in the Restatement (Third) of the Law of Trusts — Prudent Investor Rule. Colorado adopted the Uniform Prudent Investor Act in 1995, which codifies the Restatement rules. C.R.S. §§ 15-1.1-101, et seq.

Under the provisions of the Uniform Prudent Investor Act, a trustee may delegate investment responsibility to a third party without liability to a beneficiary for the conduct on the part of the delegate, so long as the trustee exercised reasonable care in the selection and monitoring of the delegate. The governance instrument need not contain language authorizing the delegation.

In 2014, the legislature enacted C.R.S. §§...