Overweight positions do not violate the trustee’s duty to diversify

In a complex opinion, the New York intermediate appellate court held that overweight positions in a diversified group of securities does not in and of itself violate the diversification requirement of the Prudent Investor Act.  The court also held that it was imprudent to retain a security, even though it was inception property, after it ceased to pay dividends because the purpose of the trust was to provide income to the current beneficiaries.  In re HSBC Bank USA, N.A., 947 N.Y.S. 2d 292 (N.Y. App. Div. 2012).

 

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.