-- Managing changeThere are a number of significant developments taking place within the securities industry, which have implications for solicitors who advise private investors and trustees and who act as trustees and executors.

Administration arrangements which may hitherto have been regarded as 'best advice', now bear re-examination in the light of so much change.The changes with a direct impact began with rolling settlement.

Then in July 1996, CREST went 'live'.

CREST is the electronic settlement system for the London equity market.

Migration to this new service from the old Talisman system at the Stock Exchange, was completed in April 1997.

CREST is to be followed this autumn by the introduction of the electronic order book (SETS) by the London Stock Exchange.

This system will replace quote driven trading, initially for FTSE 100 stocks, although it is intended the FTSE 350 will move to the 'book' in due course.

It is also an ticipated that CGO 2, the Central Gilts Office new settlement system for gilts, similar to CREST, will also go 'live' sometime before the end of 1997.Other changes, whose impacts are as yet unquantifiable, include the merger of Self Regulatory Organisations (SROs) into the Super SIB; European Monetary Union (EMU); the government reviews of welfare, pensions and savings; and an increasing awareness among investors of telephone and electronic services for banking and share dealing.-- Rolling settlement and CRESTThe first and most obvious change was CREST, which has delivered the mechanism for dematerialisation and hence electronic, and therefore faster, settlement -- potentially shortening to T+3 in 1998 (T+number, is the trade date plus the number of days in which a bargain must be settled).

This development has brought great advantages to the City in general, bringing it into line with all other world financial centres.

It benefits in particular those investors who have chosen to use nominees.

For all those trustees and shareholders who still hold paper certificates however, the benefits of electronic settlement will not yet be clear, indeed they may be feeling increasingly disadvantaged.

To settle a certificated bargain usually takes longer than the standard T+5 timeframe, typically T+7 or T+10, as the holding must be 'dematerialised' between the bargain being struck and the delivery of the stock to the market.

From the time a certificate and CREST transfer form arrive in a broker's office it proceeds on a circuitous journey from the broker by a courier service, via the 'CREST counter', to the company's registrar, who must check that the certificate and transfer form match its register and the bargain details it has received from CREST.

Providing they all tally, the registrar then 'dematerialises' the holding and transfers it to the broker's nominee account in CREST.

From there the broker can then deliver it to the market.

Not only is this method of settlement slow and cumbersome when compared with electronic delivery, it is also more expensive and is likely to become increasingly so.Of course some private investors and many trustees are unwilling or unable to use nominees for the custody of their shareholdings.

While it will be widely welcomed that the Law Commission's consultation paper 146 -- Trustees' Powers and Duties -- proposes that trustees should have the power to vest trust property in nominees, it will be some time before this and many of its other constructive proposals reach the statute book.

In the meantime, there is fortunately an alternative route for those who must, or may wish to, retain title to their investments and also take advantage of electronic settlement.-- Sponsored membership of CRESTInvestors can become sponsored members of CREST -- just as we can keep all our money in notes and coins in our pockets or, more conveniently in electronic form in a bank account, so we can now hold shares in electronic form in individual CREST accounts, retaining present registration details, as an alternative to keeping certificates.

This enables electronic delivery of stock to the market and incurs none of the delays and costs associated with paper share certificates.

But in all other respects nothing changes -- title and shareholders' rights are retained by investors and trustees.While there is no implied power for trustees to delegate the custody of trust property to a nominee, the Trustee Act 1925 s.23 does give the power to delegate administrative tasks to agents '...whether a solicitor, banker or stockbrok er to transact any business or do any act required to be transacted or done in the execution of the trust...'.

The Uncertificated Securities Regulations 1995, part V s.33 (1), specifically authorise trustees to become sponsored members of CREST in the absence of an express prohibition in the trust instrument.

The Law Commission has also commented: '[trustees] will not be liable for breach of trust by reason only of their becoming such a member and there is no reason why trustees should not become sponsored members.

Although CREST has not been in operation long enough to obtain an accurate picture, our limited inquiries have revealed that sponsored membership is not expensive, and presents few (if any) problems in practice.'In addition to this comforting message to trustees, the accountant of court at the court of Ssession in Scotland wrote to all his curators bonis in June 1996 saying, 'If curators are of the view that it would be a prudent act of management to dematerialise any shares which they hold for a particular Ward, I would have no objection to them becoming a sponsored member of CREST in respect of those shares.

This would enable the administration of Ward's estates to have the benefit of the quicker dealing arrangements, while retaining the estate under the curator's control.'These remarks are reassuring to trustees, investors and their professional advisers, yet they should be careful to 'look for a sponsor who is financially solid and to ensure that [the sponsor] acts only on properly authorised instructions' and enquire 'whether the sponsor has adequate reconciliation procedures and insurance cover against dishonest employees' (CREST Sponsored Membership for the Private Investor issued by the CREST project team atthe Bank of England, April 1995).

It has been said by some insurers that electronic records are more secure as evidence of title than paper documents, which can so easily be lost, stolen or forged and not so easily reconciled.

The general costs of custody for paper documents, and their associated compliance costs to professional advisers, are also likely to be more than for those who maintain electronic records.

Since April 1997, when sponsored membership for private investors and trustees became a realistic alternative, CRESTCo has received 18,000 requests for sponsored membership agreements, and already 1,300 individuals and trustee bodies now have their own accounts in CREST and all their stock in electronic form.-- The Stock Exchange electronic order bookQuicker dealing and settlement arrangements will be increasingly necessary for the market's expected move to standard T+3 settlement sometime in 1998 and the introduction of the order book in October 1997, which will not accept deals for non-standard settlement.

Although use of the 'order book' is not compulsory and non-standard settlement periods, necessary for certificated bargains, can be negotiated with market makers off the book, it cannot always be guaranteed that they will achieve the best possible price, and the costs for certificated settlement of such bargains are also rising.

It will continue to be possible to deal for 'non-standard' terms, but it is certain that future investment in brokers' services will be directed at the electronic clients and not those lingering with certificates.

Bearing in mind the duty of trustees to obtain 'best price', trustees who fail to consider whether disadvantages will flow from retaining certificates may be held to have committed a breach of duty resulting in quantifiable loss to their trust fund.-- More change to come...Of the other impending changes for investors, the most significant are likely to be the creation of Super SIB and the government's intention to launch individual savings accounts (ISAs) in 1999.

The 'Super' SIB must be cautiously welcomed, in the hope that it will reduce the myriad of complex and contradictory requirements of the financial services industry, and more importantly cut its costs.

There is nothing more dissuasive to investors than than to have to wade through reams of small print, laden with jargon before making an investment.

Although an initial report from the SIB is imminent, as always the devil will be in the detail and much lobbying is bound to ensue.

Understandably the managing director of Solicitors for Independent Financial Advice (SIFA) has already made a public plea to the SIB for Solicitor IFAs to remain under Law Society regulation, and most other professional advisers will also be making representations.

It is essential that the business of regulation goes forward constructively, particularly if the government intends individuals to take more responsibility for their own welfare, for example through ISAs, rather than the state providing a cushion for all, forever.

Therein lies the real opportunity for professional advisers, providing they embrace the electronic age.