2  Introduction

January 2026

This report presents the findings from research into security trustees for the UK social investment market. The research aimed to uncover current availability, attitudes, understanding and experience of security trustees in the UK social investment marketplace. The research comprised desk research, a survey of market participants and a series of in-depth stakeholder interviews.

This research was guided by four objectives:

The information presented in this report is based on a combination of desk-based research, a sector-wide survey, and one-to-one stakeholder interviews.

Research was funded by The Connect Fund.

In line with our commitment to open research, the survey, analysis tools and charts are available in a public access Github repository, https://github.com/i-for-change/security-trustee-research.

2.1 Background

Many social investments are structured as secured loans. When there are multiple investors, such as in a syndicated loan or when debt is issued to a number of bondholders, a Security Trustee is often appointed to hold and manage the security interests on behalf of all investors. In the event of a default, the Security Trustee is authorised to act on behalf of the investor group, with the authority to enforce the security and distribute proceeds in line with the agreed investment terms.

In many historic social investment deals, one of the lead investors would volunteer to take on the role of Security Trustee. However, this practice is becoming less common. Investors who have been through the complexities of managing a default often decide not to take on the responsibility again.

A common alternative is to appoint a third-party Security Trustee, typically a commercial provider with experience in conventional finance but limited exposure to social or impact investing. While this approach relieves individual investors of the responsibility, it introduces additional costs; the security trustee remains in the background and is not actively involved in the relationship between the borrower and investors unless a default occurs. This passivity, together with the Security Trustee’s lack of familiarity with impact goals or the values driving social investors can lead to disagreement and create additional complexity when collective decision-making is needed during a default scenario. This lack of familiarity is compounded by a potential legal conflict: the trustee’s primary fiduciary duty is normally understood to be solely about money, a duty which may be perceived to directly oppose the investors’ desire to pursue a ‘workout’ solution that preserves social impact at the cost of a slower or potentially lower financial return.

2.2 The role of a security trustee

A Security Trustee is appointed to hold and manage security interests on behalf of a group of investors or lenders. This role is commonly required in financial transactions involving multiple investors—such as syndicated loans, bond issuances, or structured finance deals—where it would be inefficient or impractical for each investor to hold individual security.

Appointing a Security Trustee improves the efficiency and coordination of secured transactions. It ensures that security interests are properly managed and, if necessary, enforced in the event of a default. When acting as a single point of contact, the trustee simplifies communication between the borrower and multiple investors and reduces administrative complexity.

Specialist Security Trustees often bring legal and operational expertise in managing and enforcing security rights, lending credibility and reliability to the financing arrangement.

2.2.1 Core Functions of a Security Trustee

The primary responsibilities of a Security Trustee include:

  • Holding the security in trust. Legally holds the collateral or security on behalf of all investors, maintaining legal title.
  • Managing the security. Carries out administrative duties such as maintaining records, monitoring compliance with the security agreement, and providing updates to stakeholders.
  • Enforcing rights in default scenarios. Takes action to protect the interests of investors if the borrower defaults on their obligations. If the borrower defaults, the trustee can enforce the security rights—this may involve seizing and selling secured assets on behalf of the investor group, or liaising with administrators or receivers where relevant.
  • Distributing proceeds. Ensures that any proceeds from enforcement actions are distributed to investors in accordance with the terms of the security agreement.

Using a Security Trustee also avoids the need to establish separate, individual security arrangements with each investor, which can be legally complex, costly, and inefficient.

Investors frequently want someone, perhaps the Security Trustee, to perform additional functions, such as:

  • Advising on restructuring or workout options. Providing guidance and recommendations to investors in the run up to, and during a default scenario, helping them navigate complex decisions about restructuring or recovery strategies. This may include balancing financial returns with the desire to preserve social impact, and working with the borrower and insolvency practitioners.
  • Facilitating communication. Acting as a liaison between different investors and the borrower, ensuring that all parties are kept informed and that communication is clear and consistent.
  • Coordinating investor actions. Organising and managing meetings, votes, and decisions among investors, particularly in situations where collective action is required.
  • Acting as an intermediary. Serving as a central point of communication between investors and other parties, including the borrower, legal advisors, insolvency practitioners, etc. This role helps to streamline processes and reduces the need for each investor to act individually.
  • Providing expertise. Offering specialised knowledge and experience in managing security arrangements, particularly in complex or distressed situations.
  • Brokering consensus. Helping to build agreement among investors, particularly when there are differing priorities or perspectives on how to handle a default situation.

2.2.2 Common types of Secured Assets

A Security Trustee may manage and enforce security interests over a wide range of asset types, including but not limited to:

  • Property-Related Assets – Mortgages, real estate, or land
  • Receivables and Inventory – Trade receivables or physical stock
  • Shares and Equity Stakes – Ownership interests in businesses
  • Cash and Bank Deposits – Liquid funds held in accounts
  • Equipment and Machinery – Physical assets used in operations
  • Intellectual Property – Patents, trademarks, and copyrights
  • Investments – Bonds, securities, or other financial instruments

It is not unusual to have a debenture over the entire business, which may include a combination of the above asset types, plus other, perhaps intangible, assets.

2.3 Regulatory framework

The matters in the section are complex, and we present a very abbreviated summary. This section must not be relied upon as legal or regulatory advice. Readers should seek their own legal advice on any specific matters.

Whether a Security Trustee is required to be regulated by the Financial Conduct Authority (FCA) depends on the specific activities they undertake:

  • The core function of holding and managing security on behalf of investors is not typically regulated under the Financial Services and Markets Act 2000 (FSMA).1
  • However, during enforcement of security in a default scenario, taking control of certain financial assets (e.g., shares, bonds) may involve regulated activities can, depending on how it is done, trigger the regulatory activity of “safeguarding”.
  • Indeed, various of the other activities that a Security Trustee might be asked to perform could be considered regulated activities under FSMA. For example, advising on restructuring options or coordinating investor actions may fall within the scope of regulated activities (e.g., advising on investments or arranging deals in investments).
  • Enabling a level of discretionary decision-making on behalf of investors, e.g. to balance impact and finance, could also trigger regulatory requirements.

  1. FCA writes, “Being a security trustee does not require FCA Authorisation https://www.fca.org.uk/news/news-stories/sentor-solutions-commercial-ltd-consumer-warning.” (accessed 30 September 2025).↩︎