Breach of Fiduciary Duty


Financial Fraud Attorney Serving Individual Investors Nationwide

The fiduciary duty rule is among the most confusing and most hotly-debated protections afforded to individual investors. While investment advisors owe a fiduciary duty to their clients, investment brokers are not necessarily subject to the same standard. As an investor who has suffered losses due to inappropriate or self-interested investment advice, understanding your rights is the first step on the road to financial recovery.

Who Owes a Fiduciary Duty to Investors?

Under current federal laws and regulations, investment advisors owe a fiduciary duty to their investor clients. This means that they have a legal obligation to make investment recommendations with the investor’s best interests in mind, and they are prohibited from recommending or engaging in trades that put their financial interests before the interests of their client. If an investment advisor makes an investment recommendation because it will generate a commission or high fees – and not because it is a sound investment for his or her client – this would be a classic example of a breach of the fiduciary standard. Other common examples of fiduciary breaches include:

  • Intentionally misleading clients into particular investments for personal financial gain (i.e. recommending high-risk investments that can generate significant commissions to low-risk investors);
  • Failing to seek the best price and terms for a particular transaction; and,
  • Making personal use of an investor’s assets.

However, even in these types of situations, it isn’t always easy to tell whether an investment advisor has breached his or her fiduciary duty. As a general rule, if you have suffered sudden or unexpected losses in your portfolio, you should speak with a financial fraud attoney promptly. Even if you do not have a claim for breach of fiduciary duty, you may have other grounds to recover your losses through arbitration with the Financial Industry Regulatory Authority (FINRA), and acting quickly will give you the best chance to secure a financial recovery.

What Are Your Rights Against a Broker Who Offers Self-Interested Investment Advice?

Unlike investment advisors, most investment brokers are not subject to a fiduciary duty. While this comes as a surprise to many people, generally speaking, the law treats brokers as salespeople and not as financial advisors.

But, while brokers may not have a fiduciary duty, they are subject to various other legal standards. For example, under FINRA’s rules for registered brokers, brokers must always provide “suitable” investment recommendations. As a result, if you have invested with a broker, you may still have various grounds to pursue a financial recovery. We encourage you to contact us promptly to discuss your legal options.

Schedule a Free Initial Consultation With a Financial Fraud Attorney at Zamansky, LLC

Zamansky, LLC is an investment and financial fraud law firm that represents individual investors nationwide. If you are concerned about losses in your investment portfolio, our attorneys can determine if you have grounds to recover financial compensation in FINRA arbitration. To get started with a free and confidential consultation, call us at (212) 742-1414 or tell us how we can help online.