COMMITTEE. [Progress 15th July.] (Hansard, 21 July 1884)

§ MR. A. GRANT
said, he had an Amendment to propose to that clause. It seemed to him that to allow Trustees to invest Trust funds in Preference Shares of railways was a permission which went far beyond what was safe or what was prudent. Preference Shares of railways had not even any fixed return in a great many cases. All those who had anything to do with railways knew that in the majority of cases of Preference Shares the dividends were dependent or contingent on the profits of each separate year, which meant that in any one year, if the profits of the undertaking were not sufficient to cover the Preference dividend, the holders of Preference Shares would have no claim to any dividend in the succeeding year. This was a fluctuating kind of security, which seemed to him not proper for the investment of Trust money. Preference Shares were not like Debenture Stock. They did not hold that fixed value which the other Stock did, but were liable to be tossed every day up and down in the market by bulls and bears continually acting on them. For this reason he would move the omission from the beginning of Sub-section 4 of the word "Preference."

§ MR. WARTON
said, he quite agreed that Preference Shares were very faulty securities, and not fit to invest the Trust funds in.

THE LORD ADVOCATE (Mr. J. B. BALFOUR)
said, that there was an Amendment proposed by the hon. Member for Aberdeen (Mr. Webster), which he proposed to accept, to the effect that all Stocks in which Trust funds were invested should have paid a dividend during the 10 preceding years. The securities proposed in this clause had been suggested by the most experienced legal authorities in Scotland. It was now found that it was almost impossible to get good investments for Trust purposes by the methods at present adopted; and those interested in the matter were of opinion that those particular Shares which had paid dividends for 10 years would afford very good security. The question was, whether the loss would not be greater by limiting the investments under the existing system than could occur through the risk of investing in these Preference Shares. The question was whether, with the safeguards which were to be proposed in the clause by the hon. Member for Aberdeen, Trust funds should not be invested in Preference Shares.

§ MR. WEBSTER
said, that the Amendment which his right hon. and learned Friend the Lord Advocate had mentioned would be a sufficient safeguard, and he trusted that it would be accepted. Trust funds must be made as absolutely safe and secure as possible; but everyone acquainted with these transactions knew the great and increasing difficulty of finding safe investments for Trust funds in Scotland. If the investments proposed were made safe, as he believed they would be by the Proviso he intended to move, he thought there would be sufficient protection in the matter, and that these funds might be allowed to be invested in the manner suggested in the clause.

§ MR. A. GRANT
said, that in reply to what had fallen from his right hon. and learned Friend on the Front Bench, he wished to point out that in the Amendment proposed there was nothing whatever said as to the dividend to be paid during the 10 years. It might be that a railway was being worked on a margin 1898 of ½ or ¼ per cent per annum on its ordinary shares, and yet they were going to allow Trust funds to be invested on a security so shaky and so liable to be swept away as that. His hon. Friend below him had stated that it was very desirable that Trust funds should be made a little more remunerative than at present. He (Mr. Grant) would point out, however, the enormous hardship which would result to many persons by rash investments of Trust funds. The House would, therefore, do well to pause before it gave power to Trustees to invest in these Preference Shares.