Trustee (escrow) services - ERDOSDR

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Trustee (escrow) services

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In the most general sense, in certain financial and asset transactions a Trustee is apopinted by a party to interact in the administration of a specific transaction.   The remitting party does not directly handle the various commercial elements or disbursement issues, but via the appointed Trustee, the cash funds or assets are managed through the Trustees professional competence, who shall aid in the oversight and efficiency of the operations and the handling of funds or the legal transfer of assets (e.g. in the case of real property).   The Trustee arrangement provides security to the parties that the matters are administerated professionally in accordance with all relavent laws and regulations.   The Trustee represents the retaining or designated party, and following the instructions shall act in the interests of the agreement/s, and is therefore entitled to receive adequate remuneration 3.5% per transaction in the form of a Trustee fee.

It is clear that the key issues of a Trustee are to maintain a duty of care, proper oversight and execution of duties in accordance with instructions.

Trustee services fall under the auspices of a lawyer
s field of competance, as opposed to say, in the USA where para-legal operations act as Trustees or Escrow agents. In the EU it is a common practice that lawyers act as a Trustees as part of the general duties in commercial and property transactions or other legal and mediation matters. In Hungary, a seperate branch of the law has not yet been expanded, but legislation is in the process of creation for this in the future. Currently, the Trustee services work under the general competancy of commercial civil lawyers.

An Asset Manager (e.g. Fund Manager) may preside over asset management, securities, real estate, property and the operating of a business (e.g. asset portfolio etc.). However, a Trustees role is confirmed and limited in the Trustee/client retainer document to encompass only: cash, cash equivalents, securities, or other real estate property and not to operate a business with those funds or assets handled under the trustee service.

The other difference between an Asset Manager and Trustee services is that an Asset Manager may:
- Have the right to receive the an asset, or act in a limited way to exercise certain decisions,
- Has the right to a fixed remuneration or shared with the owner of the asset in profit (e.g. dividend)

- May have the right to buy-out via option the said asset place in management.  

The Trustee has no such powers. The Trustee lawyer's rights are strictly:
- The fulfillment of instructions
- Receive a fixed fee remuneration for services and costs in performing the procedural actions related to the trustee handling fulfillment, or
- The authority to hold the cash funds or assets securities, titles for a stipulted period of time until discharged by instructions from the client.
- The Trustee is bound by law to ensue proper KYC and AML regulations are followed, and to report any suspicious activity or suspicion of money laundering activities.

The Trustee lawyer receives the cash funds or assets only for deposit astee may not use the funds or assets in any capacity for personal or other third parties,. Further, the Trustee may not accept any such request for services from any person that may wish to give him such permission to act with the funds or assets as if they were his own.

The cash funds or the asset deposits are registered electronically with the regional bar associations, in accordance with Hungarian and EU regulations. In the case of our office, this is registered with the Hungarian Bar Association Budapest Branch.

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