Definition and Role of a Fiduciary
- A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.
- They prudently take care of money or assets for another person.
- Fiduciaries can include corporate trust companies, banks, financial advisers, and asset managers.
- Their role is to act in the best interest of the person who trusts them.
- Fiduciaries have a duty of undivided loyalty and must avoid conflicts of interest.
Fiduciary Duties and Obligations
- Fiduciary duty is the highest standard of care in equity or law.
- Fiduciaries must be extremely loyal to the person they owe the duty to.
- They must not profit from their position without consent.
- Different jurisdictions have different types of fiduciary obligations.
- Fiduciary duties require a higher level of behavior and undivided loyalty.
Fiduciary Duties in Different Jurisdictions
- Canadian law has a more expansive view of fiduciary obligation than American law.
- Australian and British law have more conservative approaches.
- In Australia, there is no comprehensive list of criteria to establish a fiduciary relationship.
- Courts prefer to develop the law on a case-by-case basis.
- Fiduciary relationships have different types and obligations.
Fiduciary Duties under Delaware Corporate Law
- Delaware corporate law is influential in the United States.
- Officers, directors, and control persons owe three primary fiduciary duties: duty of care, duty of loyalty, and duty of good faith.
- Duty of care requires informed decision-making and consideration of alternatives.
- Duty of loyalty requires looking out for the interests of the company and its owners.
- Duty of good faith requires exercising care and prudence in business decisions.
Importance of Fiduciary Duties
- Fiduciary duties ensure that those managing other people's money act in their beneficiaries' interests.
- Equity requires a stricter standard of behavior for fiduciaries compared to common law.
- Fiduciaries must not be in situations where their personal interests conflict with their duty.
- They must not profit from their position without knowledge and consent.
- Fiduciaries are obligated to act with undivided loyalty and at a higher level than others.
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, financial advisers, financial planners, and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation, good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.
A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
Fiduciary duties in a financial sense exist to ensure that those who manage other people's money act in their beneficiaries' interests, rather than serving their own interests.
A fiduciary duty is the highest standard of care in equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal") such that there must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from their position as a fiduciary, unless the principal consents. The nature of fiduciary obligations differs among jurisdictions. In Australia, only proscriptive or negative fiduciary obligations are recognised, whereas in Canada, fiduciaries can come under both proscriptive (negative) and prescriptive (positive) fiduciary obligations.
In English common law, the fiduciary relation is an important concept within a part of the legal system known as equity. In the United Kingdom, the Judicature Acts merged the courts of equity (historically based in England's Court of Chancery) with the courts of common law, and as a result the concept of fiduciary duty also became applicable in common law courts.
When a fiduciary duty is imposed, equity requires a different, stricter standard of behavior than the comparable tortious duty of care in common law. The fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, not to be in a situation where their fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from their fiduciary position without knowledge and consent. A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty".
