The Big Deal with Brokers and Fiduciary Duties
After the financial meltdown there was talk of the Securities and Exchange Commission imposing a fiduciary duty standard on financial advisors and brokers. That no longer looks like the case and apparently the SEC is only going to "study" the situation. Why does it matter? In Texas, a fiduciary-defendant has the burden of proof in a trial. Below is the question the jury considers on fiduciary duty:
Did Mr. Broker comply with his fiduciary duty to Mr. Customer?
Because a relationship of trust and confidence existed between them Mr. Broker owed Mr. Customer a fiduciary duty.
To prove he complied with his duty, Mr. Broker must show:
a. The transaction[s] in question [was/were] fair and equitable to Mr. Customer;
b. Mr. Broker made reasonable use of the confidence that Mr. Customer placed in him;
c. Mr. Broker acted in the utmost good faith and exercised the most scrupulous honesty toward Mr. Customer;
d. Mr. Broker placed the interests of Mr. Customer before his own, did not use the advantage of her position to gain any benefit for himself at the expense of Mr. Broker, and did not place himself in any position where his self-interest might conflict with her obligations as a fiduciary; and
e. Mr. Broker fully and fairly disclosed all important information to Mr. Customer concerning the transaction[s].
Answer: _______________
In most civil cases, the burden of proof is on the Plaintiff. Not in a fiduciary duty case where the defendant has the burden. Though the majority of broker/dealer disputes take place in the arbitration format, a proceeding in state court would have a far different complexion if fiduciary duties are imposed, not to mention the effect it would have on the broker/customer relationship.
