The fiduciary duties and responsibilities of an individual or group of individuals entrusted with another's monetary funds, retirement plans, stocks, etc., also make that individual legally responsible for that individuals money in some instances. While there are a number of facts and circumstances generally defining fiduciary status, it is commonly known as an individual who "manages the property or financial control in a professional environment". When an investor gives their broker discretionary authority, that individual authorizes the broker to make investments without consulting the investor. If the broker has this discretionary authority or "control" over an investor's account that person may owe the investor a fiduciary duty.
A fiduciary duty imposes a duty on the broker to use extra care in making investment decisions and in managing the overall account for the investor. Fiduciary liability is not determined by investment performance, but rather by whether prudent investment practices were followed by the investment advisor. Fiduciary duty is also highly associated with a moral compass comprised of honesty and integrity, because of the trust associated with this professional position.
Full and complete disclosure of any fees, conflicts of interest, etc., are required by an investment advisor as per the Security Exchange Commission (SEC) mandatory regulations. Part of a broker's responsibility is to individually assess a client's available risk and monetary goals when determining investments. To decide whether the broker should be held liable for advice, it is necessary to determine whether the investment advice was suitable for the client and whether the investment professional, bound to a fiduciary duty, acted in the client's best interests. It is imperative for both parties to outline the risk profile and investment goals on paper to not only get what is asked for, but for protection of both parties. Then the advisor is duty-bound to help ensure that the investment choices selected remain consistent with the outlined and agreed profile and goals.
If any investment advice provided by a broker, that a client believes caused losses because it was inappropriate according to their personal investment profile/goals, should immediately contact legal advisors for guidance and direction. It is important to outline an individuals risk profile and financial goals because an investor may be compensated for monetary losses if a broker does not abide by the investor's profile.
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