#8062
Awan Hammad
Participant

    Hi Jean

    The 2 issues that you have raised are diversification in that they have only invested in 3 shares and that liquidity is an issue in that they do not have enough cash to pay the tax liability.

    From a management letter perspective, I would just remind the trustees of their responsibilities under SIS regulation 4.09 in respect of investment strategies.

    Under SIS regulation 4.09:

    “The trustee of the entity must formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the entity including, but not limited to, the following:

                         (a)  the risk involved in making, holding and realising, and the likely return from, the entity’s investments, having regard to its objectives and expected cash flow requirements;

                         (b)  the composition of the entity’s investments as a whole, including the extent to which they are diverse or involve exposure of the entity to risks from inadequate diversification;

                         (c)  the liquidity of the entity’s investments, having regard to its expected cash flow requirements;

                         (d)  the ability of the entity to discharge its existing and prospective liabilities;

                         (e)  whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.”

     

    Thanks

    The Auditors Institute

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