Fiduciary

What is a Fiduciary?

A fiduciary is an individual or an organisation that acts on behalf of another individual or a group of individuals to manage assets. The fiduciary is responsible to maintain good faith and trust with the opposite party. It’s the legal duty of a fiduciary to act in the best interest of the concerned party.

A fiduciary could be responsible for the well-being of the party. The well-being would mainly include managing the finances of the other individual or group of individuals. Money managers, bankers, accountants, financial advisors, board members and other corporate officers all have fiduciary responsibilities.

These responsibilities are legal and ethical. When a part consciously accepts the fiduciary duty of the other party, it becomes legal and important to act for the good of the party. They are expected to manage assets for the benefit of the other person rather than their own profit. The prudent-person rule requires that any conflict of interest that arises between a fiduciary and the concerned party must be handled with utmost care.

It is required in most cases that no profit be made from the concerned relationship unless such an agreement is made at the time of the commencement of such a relationship. In the United Kingdom, fiduciaries cannot gain profit from their position. This was a rule according to an English High Court, Keech vs. Sandford (1726). If the concerned party provides consent at the beginning of the relationship with the fiduciary, the benefit can be received. However, they will be described as an opportunity.

Fiduciary Duties in Business

Various fiduciary duties are existing in business relationships today. They are mentioned below:

• Invest corporations and investors
• Guardians and wards
• Corporate board members and shareholders
• Lawyers and clients