Breach of Fiduciary Duty

Breach of Fiduciary Duty

A fiduciary is a person who, by law, is responsible for acting in the best interests of another person. Financial advisors may have a fiduciary relationship with their client, depending on the nature of the relationship between the client and the financial advisor. If the financial advisor is a fiduciary and he/she puts his/her interests before the client’s interest, the financial advisor may have breached his/her fiduciary to the client. In case of breach of fiduciary duty, financial advisors may be liable to their clients under U.S. securities laws, or state securities laws. Any action by a financial advisor that is contrary to the best interests of the client is prohibited by FINRA and the SEC.

Financial advisors might breach the fiduciary duty they owe to their clients in a number of ways. Engaging in any type of fraud that benefits the Financial advisors at the expense of his/her clients is a breach of the fiduciary duty. Other examples include misrepresentations, churning, reverse churning, negligence, unauthorized trading and the sale of certain investment products (i.e., variable annuities, variable universal life insurance, non-traded REITs). Effectively, any action by the financial advisor that is harmful to the client (even if there is no financial gain by the financial advisor), can be deemed a breach of fiduciary duty.