Fiduciary
[1] 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.
[2]: 68 [3] 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.
[10][11] In English common law, the fiduciary relation is an important concept within a part of the legal system known as equity.
[13] Courts have so far refused to define the concept of a fiduciary, instead preferring to develop the law on a case-by-case basis and by way of analogy.
In SEC v. Chenery Corporation,[16] Frankfurter J said, To say that a man is a fiduciary only begins the analysis; it gives direction to further inquiry.
In doing so, they may rely on employees and other advisers so long as they do so with a critical eye and do not unquestionably accept the information and conclusions provided to them.
The higher the level of expertise, the more accountable that person will be (e.g., a finance expert may be held to a more exacting standard than others in accepting a third party valuation).
A debate exists as to the nature and extent of this duty following a controversial landmark judgment from the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders.
A person in a sensitive position sometimes protects themselves from possible conflict of interest charges by setting up a blind trust, placing their financial affairs in the hands of a fiduciary and giving up all right to know about or intervene in their handling.
Under Roman law a woman could arrange a fictitious sale called a fiduciary coemption in order to change her guardian or gain legal capacity to make a will.
[53] In Roman Dutch law, a fiduciary heir may receive property subject to passing it to another on fulfilment of certain conditions; the gift is called a fideicommissum.
[55] Joint ventures, as opposed to business partnerships,[38] are not presumed to carry a fiduciary duty; however, this is a matter of degree.
Similarly, ordinary commercial transactions in themselves are not presumed to but can give rise to fiduciary duties, should the appropriate circumstances arise.
In Breen v Williams,[3] the High Court viewed the doctor's responsibilities over their patients as lacking the representative capacity of the trustee in fiduciary relationships.
Moreover, the existence of remedies in contract and tort made the Court reluctant in recognising the fiduciary relationship.
In 2011, in an insider trading case, the U.S. Securities and Exchange Commission brought charges against a boyfriend of a Disney intern, alleging he had a fiduciary duty to his girlfriend and breached it.
The boyfriend, Toby Scammell, allegedly received and used insider information on Disney's takeover of Marvel Comics.
[66] In the case of Canadian Aero Service Ltd v O'Malley,[67] it was held that a senior employee is much more likely to be found to owe fiduciary duties towards his employer.
[70] The rule would require "brokers offering retirement investment advice to put their clients' interest first".
[71][72] Prior to its repeal, the rule was also dealt blows by the US Fifth Circuit Court of Appeals in March and June 2018.
[73] For example, two members, X and Y, of a band currently under contract with one another (or with some other tangible, existing relationship that creates a legal duty) record songs together.
One day, X takes some demos made cooperatively by the duo to a recording label, where an executive expresses interest.
Note, X will not be punished or totally denied of the benefit; both X and Y will receive a half share in the contract and the money.
[13][22][34] If this requirement is not met then the property is deemed by the court to be held by the fiduciary on constructive trust for the principal.
If the bribe is treated as held on a constructive trust then it will remain in the possession of the fiduciary, despite bankruptcy, until such time as the principal recovers it.
Breach of fiduciary duty by a lawyer with regard to a client, if negligent, may be a form of legal malpractice; if intentional, it may be remedied in equity.
Some experts have argued that, in the context of pension governance, trustees have started to reassert their fiduciary prerogatives more strongly after 2008 – notably following the heavy losses or reduced returns incurred by many retirement schemes in the wake of the Great Recession and the progression of ESG and Responsible Investment ideas: "Clearly, there is a mounting demand for CEOs (equity issuers) and governments (sovereign bond issuers) to be more 'accountable' ... No longer ‘absentee landlords', trustees have started to exercise more forcefully their governance prerogatives across the boardrooms of Britain, Benelux and America: coming together through the establishment of engaged pressure groups.
"[93] However, in the United States, there are questions whether a pension's decision to consider factors such as how investments impact contributors' continued employment violate a fiduciary duty to maximize the retirement fund's returns.
[94] Pension funds and other large institutional investors are increasingly making their voices heard to call out irresponsible practices in the businesses in which they invest [95] The Fiduciary Duty in the 21st Century Programme, led by the United Nations Environment Programme Finance Initiative, the Principles for Responsible Investment, and the Generation Foundation, aims to end the debate on whether fiduciary duty is a legitimate barrier to the integration of environmental, social and governance (ESG) issues in investment practice and decision-making.
The programme also published roadmaps which set out recommendations to fully embed the consideration of ESG factors in the fiduciary duties of investors across more than eight capital markets.
