Breach of Fiduciary Duty

When you invest, in addition to your financial assets, you place a lot of trust in a brokerage firm, fiduciary, or financial advisor. The expectation is that they have your best interests in mind. The stockbroker must give sound advice based on your financial goals and act in your best interests regarding your investment. This is the basis of the fiduciary relationship between broker and investor, and certain ethical and moral obligations are placed on the fiduciary to ensure that your investment is in safe hands.

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Unfortunately, some fiduciaries may take advantage of you as a client, using the financial assets that you’ve placed in their hands for their own benefit and financial gain. A fiduciary’s actions regarding your investment must be free of personal bias, without conflicts of self-interest. This means a fiduciary may not use your principal investment for financial gain. The fiduciary must make investment recommendations based on your personal financial goals rather than what will most benefit the brokerage firm.

This also applies to corporate assets, corporate property, and corporate opportunities. A fiduciary may not use any of your business assets for financial gain. If a fiduciary does get involved with misusing corporate funds for their benefit, this may also result in fraud, based on the specific actions of the fiduciary. This is why it is crucial to ensure that all corporate decisions regarding investments are considered and agreed upon by the Board of Directors or executive board of the company in question.

It may be difficult to prove that fraud is involved, as it would be necessary to prove that the intent was criminal. Breach of fiduciary duty, however, is much more straightforward to prove in a court of law. The only proof that is necessary to win a breach of fiduciary duty case is that the broker was in a fiduciary position and broke the trust instilled into that position by taking advantage for their financial gain.