Professional Documents
Culture Documents
KEY TAKEAWAYS
A fiduciary duty involves actions taken in the best interests of
another person or entity.
Fiduciary duty describes the relationship between an attorney
and a client or a guardian and a ward.
Fiduciary duties include duty of care, loyalty, good faith,
confidentiality, prudence, and disclosure.
It has been successfully argued that an employee may have a
fiduciary duty of loyalty to an employer.
A breach of fiduciary duty occurs when a fiduciary fails to act
responsibly in the best interests of a client.
01:26 / 01:28
In this case, the parent will name a person or an entity, such as a law
firm or bank, as trustee of the estate. That person or entity has a
fiduciary duty to the children, who are the beneficiaries of the estate.
As fiduciary, the trustee must make decisions that are in the best
interest of the beneficiary as the latter holds equitable title to
the property.
Guardian/Ward
In a guardian/ward relationship, an adult is designated as the legal
guardian of a minor child. The guardian, as the fiduciary, is tasked with
ensuring that all matters related to the daily welfare of the child are
dealt with responsibly and in the best interests of the child. This care
can include such things as deciding where the child will attend school,
arranging for health care, and providing an allowance.
Agent/Principal
Any person, corporation, partnership, or government agency might be
called upon to act as agent without conflict of interest on behalf of a
principal.
Attorney/Client
The agreement between an attorney and a client is arguably one of the
most stringent of fiduciary relationships.
The U.S. Supreme Court has stated that the highest level of trust and
confidence must exist between an attorney and a client. An attorney, as
a fiduciary, must act with fairness, loyalty, care, and within the law on
behalf of the client.
Controlling Stockholder/Company
In certain circumstances, fiduciary duties may be required of a
stockholder who possesses a majority interest in a corporation or who
exercises control over its activities. A breach of fiduciary duty may result
in personal legal liability for the controlling shareholder as well as
directors and officers.
Duty of Care
This is the responsibility to inform oneself as completely as possible in
order to exercise sound judgments that protect a beneficiary's interests.
It can involve the thoughtful consideration of options and sensible
decision-making that's based on a careful examination of available
information.
Duty of Loyalty
This pertains to acting in the best interest of the beneficiary at all times,
putting their well-being first and foremost. It includes the duty of the
fiduciary to excuse themself from taking actions when there's a conflict
of interest with the beneficiary's welfare.
Duty of Confidentiality
A fiduciary must maintain the confidentiality of all information relating
to the beneficiary. They must not use any form of it, whether written or
spoken, for their personal gain.
Duty of Prudence
Fiduciaries must administer matters and make decisions concerning the
interests of beneficiaries with the highest degree of professional skill,
caution, and critical awareness of risk.
Duty to Disclose
Fiduciaries must engage in completely forthright behavior, disclosing
any and all relevant information that could have an impact on their
ability to carry out their duties as fiduciary and/or on the well-being of a
beneficiary's interests.
These expectations may not be actual fiduciary duties but they may be
spelled out in an employee handbook or contract clause.
Case law indicates that breaches of fiduciary duty most often happen
when a binding fiduciary relationship is in effect and actions are taken
which violate or are counterproductive to the interests of a specific
beneficiary.
SELECT A STOCK
$ 1000
5 years ago
CALCULATE
A Duty Existed
The plaintiff must show that a legal fiduciary duty existed. Many
professionals are obligated, legally and ethically, to conduct their
businesses honestly. However, that doesn't mean that they are
fiduciaries who must act solely in the interest of a particular client. A
fiduciary duty is accepted as such by a fiduciary, typically in writing.
A Breach Occurred
The plaintiff must show that a fiduciary duty was breached. The type of
breach varies in every case. For example, if an accountant was sloppy in
filling out a client's tax returns, and the client was slapped with an
enormous fine for nonpayment, the accountant may be guilty of a
breach of fiduciary duty. However, if the client was sloppy and failed to
provide complete and necessary information, no breach occurred.
In this case, the question of whether the employees had a fiduciary duty
to their former employer, and breached it, was fundamental to the
appeal that brought the case to the state's highest court.
The court affirmed the lower court's ruling that the employees owed
Mario a duty of loyalty. In effect, it supported the claim of a breach of
fiduciary duty, and a penalty of more than $1 million. [1]
However, the court ruled that the losses could not be attributed directly
to the actions of its former employees. The suit failed.
The company sued the bank that took the deposits, alleging that it
aided and abetted a breach of fiduciary duty. The court ruled that there
was insufficient evidence that the bank was aware of its role in the
scam.
Fiduciary duties are meant to ensure that the fiduciary acts only in the
best interests of a principal or beneficiary. What's more, the fiduciary
must act diligently to protect those interests.
While you should always expect a high standard of care from a fiduciary,
you can protect yourself by understanding the rights that this
relationship grants you and the responsibilities that are not part of a
fiduciary's duties.
ARTICLE SOURCES
Related Articles
FINANCIAL ADVISOR
401(K)
PRACTICE MANAGEMENT
Related Terms
Fiduciary Definition: Examples and Why They Are
Important
A fiduciary is a person or organization that acts on behalf of a person or persons
and is legally bound to act solely in their best interests. more
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z