Breach of Fiduciary Duty Attorney
Breach of fiduciary duty is one of the most common claims asserted by customers in a securities arbitration. It is easy to understand why: customers place not only their money in the hands of their investment professional, they place their trust and confidence in their investment professional to protect and manage their assets.
A fiduciary duty requires the investment adviser, and in certain circumstances a stockbroker, to act in the best interest of the person to whom they owe the duty, namely the customer. In this regard, the investment professional owes the client the duties of due care, loyalty, and good faith and fair dealing.
Whether an investment professional owes a fiduciary duty to a customer depends upon many factors, including whether federal or state law applies. Most states impose a fiduciary duty on brokers to act in the best interests of their customers; federal law varies throughout the country, though it imposes a fiduciary duty on registered investment advisors under the Investment Advisors Act of 1940 (“IAA”).
Determining the existence of a fiduciary duty between the broker and customer includes consideration of the parties’ expectations, both express and implied, regarding the relationship, and the circumstances between the broker and customer, such as if and when the broker assumes control over the account, whether the broker and customer are friends and the customer is relying on the relationship, and whether the broker exercises control over the account of an elderly or young customer who has little investment experience or knowledge. Other facts and circumstances considered to determine the presence of a fiduciary duty include whether: the recommendation or strategy is suitable; the broker adequately informed the customer about the risks involved with the recommendation or strategy; the broker disclosed any personal interest in the recommended investment or other conflict of interest that might have affected the broker’s recommendation; the broker misrepresented or omitted material facts relevant to the recommendation or strategy; and the customer authorized the transaction.
Under the IAA, an investment adviser is a fiduciary to their clients. This means that the investment adviser owes their clients the duties of care, loyalty and good faith and fair dealing. In exercising these duties, investment advisors have an obligation to act in the best interest of their clients, provide investment advice that conforms to the client’s investment objectives and risk tolerance, provide full and fair disclosure of all material facts that clients would consider to be important when making investment decisions, eliminate conflicts of interest, and refrain from taking unfair advantage of their client’s trust.
The Law Office of Jeffrey M. Haber can help you determine whether an investment loss is the result of a breach of fiduciary duty. Customers who suffer losses as a result of an investment professional’s breach of fiduciary duty may be able recover their losses in a FINRA arbitration. If you believe your broker, adviser, or investment professional has breached their fiduciary duties in recommending an investment or strategy, contact Jeffrey M. Haber to discuss your rights.