A stockbroker reIers to a licensed person or organization that buys and sells securities on

a stock market Ior their clients. A stockbroker is instructed by a client and it acts as an agent oI
the client. As there is a Iiduciary relationship between the stockbrokers and the clients, the
normal rules oI the law oI agency apply to them. A stockbroker as having a Iiduciary relationship
with their client has several obligations not to place himselI in a position oI conIlict oI interest
with his client, as well as not to use inIormation, knowledge or his position or opportunity arising
Irom these Ior his own beneIit.
Rule 404.3(6) oI Rules oI Bursa Malaysia stated that every Participating Organization
shall ensure that its Dealer's Representatives carry out client`s instructions with proper skill, care
and diligence and give priority to execution oI orders given by the clients in the sequence in
which they are received. Thus, a stockbroker should use due care, skill and diligence in carrying
its duties. Due care means the standard oI care reasonably expected oI a stockbroker in
discharging the responsibilities that he owes to his client. While due diligence reIers to the level
oI judgment, care; prudence, determination, and activity that a stockbroker would reasonably be
expected to do under particular circumstances. Whether a stockbroker has breached his duty to
exercise skill is determined by reIerence to the objective body oI knowledge and expertise
possessed by stockbroker. It should be noted that a stockbroker is expected to exercise skill
which is commonly possessed by others stockbroker.
In the case oI Sharedeal Financial Consultants (P) Ltd. v. SEBI,
1
it was held that due
diligence required is not that oI an ordinary or prudent person but that oI a stockbroker who
would be required to perIorm his duties towards his client using his skill and reasonable care. In
another case, Daly v Sydney Stock Exchange Limited
2
, a potential investor sought advice Irom a
stock broking Iirm about share investment opportunities. An employee oI the Iirm advised the
investor to deposit his Iunds with the Iirm until an appropriate time arose to buy shares although
the Iirm was in insecure Iinancial position. The Iirm became insolvent some months later and the
investor`s Iunds were lost. It was held that a stock broking Iirm that provided investment advice
to a client owes Iiduciary duties to that client. Thus, the stock broking Iirm has Iailed to exercise
his duty diligently in advising his client.

(2003) 4 Comp LJ 148 (SAT).

(1986) 160 CLR 371