
Contents
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I. Introduction I. Introduction
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II. Trigger II. Trigger
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A. Federal Law A. Federal Law
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1. Fiduciaries under the Investment Advisers Act 1. Fiduciaries under the Investment Advisers Act
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I. Broker-Dealers I. Broker-Dealers
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II. Banks II. Banks
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III. Family Offices III. Family Offices
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IV. Other Exclusions IV. Other Exclusions
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2. Fiduciaries under ERISA 2. Fiduciaries under ERISA
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3. Fiduciaries under the Investment Company Act 3. Fiduciaries under the Investment Company Act
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4. Fiduciaries under the Commodity Exchange Act 4. Fiduciaries under the Commodity Exchange Act
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B. State Law B. State Law
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1. Trust Law 1. Trust Law
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2. Agency and Contract Law 2. Agency and Contract Law
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III. Loyalty III. Loyalty
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IV. Care IV. Care
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V. Other Legal Obligations V. Other Legal Obligations
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VI. Mandatory or Default Terms VI. Mandatory or Default Terms
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A. Fiduciary Status A. Fiduciary Status
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B. Disclosure B. Disclosure
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C. Exculpatory Provisions C. Exculpatory Provisions
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D. Delegation D. Delegation
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E. Resignation or Exit E. Resignation or Exit
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VII. Remedies VII. Remedies
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VIII. Conclusion VIII. Conclusion
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Acknowledgments Acknowledgments
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8 Fiduciary Principles in Investment Advice
Get accessArthur B. Laby is Professor of Law at Rutgers Law School and Co-Director at the Rutgers Center for Corporate Law & Governance.
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Published:09 May 2019
Cite
Abstract
This chapter examines the fiduciary principles governing investment advice. Fiduciary principles in investment advice are both straightforward and complex. They are straightforward because most investment advisers are considered fiduciaries and subject to strict fiduciary duties under federal and state law. Their complex nature arises from the fact that many individuals and firms provide investment advice but are not deemed investment advisers and, therefore, are not subject to a fiduciary obligation. This chapter first explains whether and when an advisory relationship gives rise to fiduciary duties by focusing on both federal and state law, as well as the individuals and firms that typically provide investment advice. In particular, it looks at certain persons and entities excluded from the definition of investment adviser and thus not subject to the Investment Advisers Act of 1940, namely broker-dealers, banks, and family offices as well as accountants, lawyers, teachers, and engineers. The chapter also considers fiduciaries under ERISA, the Investment Company Act, and the Commodity Exchange Act before discussing the fiduciary duty of loyalty and how it is expressed and applied in investment advisory relationships; the fiduciary duty of care and how it differs from other standards of conduct, such as a duty of suitability; and other legal obligations imposed on investment advisers and how those obligations relate to an adviser’s fiduciary duty. Finally, the mandatory or default terms with regard to an investment adviser’s fiduciary duties are explored, along with remedies available for breach of fiduciary duty.
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