The trust arm of private bank Rothschild is being bought out by its management, finews.com has learned. The move follows a slap for its dealings with 1MDB.

Zurich-based Rothschild & Co is selling its wealth planning and trust arm to Richard Martin, a senior executive at the unit, and to an unnamed investor, Rothschild confirmed to finews.com on Wednesday.

Financial details of the move weren't disclosed by Rothschild or the management buyers. A senior team from the trust arm will support Martin in the management buyout, Rothschild said.

Negligent on 1MDB

The trust arm was the source of embarrassing headlines recently when Switzerland's regulator found it negligent in dealing with 1MDB funds in July. Rothschild, part of the eponymous French-British dynasty which traces its wealthy roots back to the 18th century, didn't mention the trust's link to the scandal in the memo. 

«We have decided to focus on growing our wealth management operations,» Rothschild Chairman Alexandre de Rothschild said. «In a changing environment, we believe that the trust business can operate more successfully in an independent structure.» 

Rothschild Ties 

The deal is expected to close in the first quarter, and the trust will be unveil a new brand for itself next month. Martin said the trust business will continue to work closely with Rothschild following the split, but didn't elaborate on specific agreements. 

In June, Swiss regulator Finma said Rothschild's trust didn't do enough on an unnamed client suspected of money-laundering. The client is almost certainly alleged 1MDB kingpin Jho Low. Former Malaysian leader Najib Razak and his wife, Rosmah Mansor, have been criminally charged in the scandal.

Trust Skirmish

Early last year, Low succeeded in booting Rothschild as a trustee of some of his luxury assets including The Viceroy L'Ermitage Hotel in Beverley Hills, CA, a Bombardier private jet, and a luxury penthouse in the Time Warner Building in New York. 

The move was part of a strategy to challenge U.S. authorities on a massive asset grab as part of their criminal investigation (Low himself remains AWOL). The head of Rothschild's trust globally, Stefan Liniger, stepped down several months later.