Breach of Fiduciary Duty

A fiduciary duty is the highest standard of care at either law or equity. A fiduciary duty is a legal or ethical relationship of confidence and trust regarding the management of money between two or more parties. It is the affirmative duty of good faith that compels the fiduciary to place the client's interest before his or her own interest. Exactly who is considered to be a fiduciary and what their duties are is determined by the laws in different jurisdictions.

When a broker agrees to execute an order, the broker and the firm have a fiduciary duty of best execution to not place the firm's interest before the client's and to execute the order at the best price available in the marketplace. If a broker agrees to manage his or her client's investments and they have discretionary authority to make decisions and trades without consulting the client, then they have fiduciary duties and responsibilities to that client.

The breach of fiduciary duty is considered to be fraud under the laws of most jurisdictions and as such is afforded certain legal benefits over other such claims as negligence.

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Institutional Investor Securities Blog - Breach of Fiduciary Duty
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