Fiduciary Fraud: An Abuse of Trust
Our legal system appoints fiduciaries to ensure the interests of those who cannot act on their own behalf are represented. When this trust is violated, the consequences can have tremendous financial and legal implications. In this article, we will review what a fiduciary is, how a fiduciary can commit fraud, and the recourse our skilled business law attorneys can provide for victims of fiduciary fraud.
What Is a Fiduciary?
A fiduciary is a person required by law to act in the absolute best interest of another person. The relationship that exists between the protector and the person whose interests are protected is a fiduciary relationship. In addition to business and financial arrangements, fiduciary relationships also exist in the realm of probate law.
Examples of fiduciary relationships include:
- Attorney/Client
- Trustee/Beneficiary
- Guardian/Ward
- Agent/Principal
- Financial Advisor/Advisee
- Executor/Estate
A fiduciary must be appointed by a court or otherwise approved by a court.
How Can a Fiduciary Commit Fraud?
As the duties and tasks of fiduciaries can vary widely based on the fiduciary relationship of which they are part, there are many ways in which a fiduciary can breach their fiduciary duty.
In general, fiduciaries owe the following duties to beneficiaries:
- Duty of Good Faith: The fiduciary must promote the beneficiary’s interests in all things, so long as the actions taken are within the bounds of the law.
- Duty of Care: Thoughtful and informed consideration of what actions or advice would best serve a beneficiary’s interests.
- Duty of Prudence: Having considered the course of action to take, a fiduciary must carefully administer a beneficiary’s affairs.
- Duty of Loyalty: The well-being and best interest of the beneficiary must come first, before the interests of any other party or the fiduciary.
- Duty of Confidentiality: The fiduciary must keep the beneficiary’s sensitive information confidential and not use it for personal gain.
- Duty of Disclosure: A fiduciary must act with transparency and candor, revealing anything that might constitute a conflict of interest or any knowledge that would be to the benefit of the beneficiary.
Breaches of duty could include an employee disclosing trade secrets to a competitor in violation of an employment contract, a financial advisor encouraging a client to invest in worthless stocks as part of a ‘pump and dump’ scheme, or the guardian of minors misappropriating funds meant for their upkeep.
What Recourse Do Victims of Fiduciary Fraud Have?
Victims of a breach of fiduciary duty have several paths to restitution. If a breach of duty is proven, victims could receive financial compensation, the return of property that was fraudulently transferred to the fiduciary, and/or injunctive relief to compel or prevent the fraudulent fiduciary’s taking of some action.
Skilled Legal Representation for Fiduciary Fraud Plaintiffs
If you believe you have been the victim of fiduciary fraud, call our office. With years of business law experience, we have the know-how and willpower to seek the fullest restitution available to you under the law.
