Business, Legal & Accounting Glossary
Involving trust, especially with regard to the relationship between a trustee and a beneficiary.
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person.
A fiduciary is a person or institution with the legal authority to act on behalf of another person. Common fiduciaries include accountants, attorneys, bankers, business advisors, financial advisors, and mortgage brokers. They can also include trustees, executors or guardians.
If someone is assigned a guardian or executor they have certain standards of conduct and must perform specific responsibilities. For example, they must carry out their duties prudently and act in accordance with the terms of the trust instrument. They should also understand how much power they have to administer the trust. Everything should be documented. For instance, if they are helping to buy a house they should have copies of all the house purchase documents. If they are responsible for investment decisions they must understand how to minimize the risk of large investment losses for the beneficiary.
The term ‘fiduciary’ comes from the Latin ‘fides’, which means faith, and ‘fiducia’, which means trust. It generally denotes a form of relationship where one person, in a position of relative vulnerability, reposes a high degree of confidence, good faith, reliance and trust in another, whose aid, advice or protection is sought and valued in connection with some matter of not inconsiderable importance. In such a relationship, good conscience requires the party providing support to act at all times for the sole benefit and interest of the party requiring support — with utmost loyalty, diligence and attention.
In the context of the law, the word ‘fiduciary’ is used either as a noun or as an adjective. As a noun, ‘a fiduciary’ is a person possessing ‘fiduciary obligations’. These require that a person acts with loyalty and good faith in any and all dealings with a particular individual or group. In general, the person to whom this loyalty is owed is known as the ‘principal’. The trustees of an express trust are taken to have fiduciary obligations to the objects (or beneficiaries) of the trust (see object trust and trustee). It would appear — following re Brooke Bond (1963) — that this requirement applies even to the trustees of a bare trust, who have no real discretion in the trust’s execution.
As an adjective, the term ‘fiduciary’ is employed to distinguish a particularly high level of moral or legal responsibility. A fiduciary duty is, in fact, the highest standard of behaviour at either equity or law. Among other things, it requires (i) extreme loyalty to whom the duty is owed, (ii) a refusal to place one’s personal interests before the object of this duty; and (iii) a commitment not to profit from one’s position as a fiduciary, unless the principal so consents.
The fiduciary relationship is perhaps the single most important concept within that portion of the legal system known as equity. When a fiduciary duty is imposed, equity requires a stricter standard of behaviour than the comparable tortious duty of care at common law. Here, not only must the fiduciary avoid any and all conflict between his stated duty and personal interests; he must also steer clear of any inconsistent or conflicting applications of that duty. In short, the fiduciary is required to promote, protect and advance the principal’s interests to the very best of his ability and to the greatest possible degree.
Relationships in which a fiduciary duty is commonly recognised by law to exist include the following:
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Fiduciary are sourced/syndicated and enhanced from:
This glossary post was last updated: 28th April, 2020 | 6 Views.