A National Securities Arbitration & Investment Fraud Law Firm CONTACT US (800) 975-4345
En Español

Breach of Fiduciary Duty

The financial services industry reforms which have been embodied in Dodd Frank Act of 2010 which directed the SEC to study the issue of a uniform fiduciary standard for financial advisors. Many retail investors do not understand and are unclear about the roles played by brokerage firms and registered investment advisers and the impact of the different regulatory regimes that apply to each. This lack of understanding belies the problem of relying on what their brokers tell them. Many retail investors may not have the time, information or market sophistication, to fully understand today’s complex financial products.

The more individually tailored the communication is to a particular customer or a targeted group of customers, the more likely it will be viewed as a recommendation. For years many financial advisors have held themselves out as financial advisors to their clients. When a financial advisor lauds their financial expertise to garner a client’s business and clients rely upon these representations, a fiduciary relationship may be formed whether in a typical “non-discretionary” brokerage account or a fee-based investment advisory account.

A Securities Exchange Commission (SEC) staff study commissioned to make recommendations concerning the implementation of a uniform fiduciary standard to protect the investing public found, “Under the present system, investors not only must consider what investments to make, but also the level of protection that they want to enjoy (assuming the investor understands the different levels of protection). Investors may even face these decisions when seeking the same advice from the same institution and the same professional, depending on whether they have a brokerage or advisory relationship. This creates unnecessary risk and complexity for investors by placing the burden on them to understand regulatory differences and to make rational economic decisions in the face of those differences. To this end, such harmonization should take into account the best elements of each regime.” While this opinion is still an aspiration for the future conduct of advisor relationships with current and potential clients, the FINRA arbitration process must consider facts to determine whether there is a breach of a fiduciary duty when investors have suffered losses.

Investment losses that are the result of a breach of fiduciary duty can be a cause of action in a FINRA arbitration claim for damages. In many instances the failure to disclose all relevant information concerning an investment recommendation may be the result of a conflict of interest between the financial advisor and his client. Financial advisors are required to avoid any conflicts of interest when providing investment advice. If a financial advisor provides commissioned based advice and the investor relies upon the representation that the advisor has his “best interest” in mind, the investor is considered reasonable in his reliance.

The Silver Law Group can help you determine whether an investment loss is the result of a breach of fiduciary duty. If an investor suffers losses as a result of a conflict of interest or other misconduct they may be able recover their losses in a FINRA arbitration claim.


To contact our attorneys please fill out the form below.