Fiduciary Fraud


DEFINITION of 'Fiduciary Fraud'

Illegal practices committed by financial institutions and financial professionals that constitute a breach of trust between the financial agent and the client. Fiduciaries are legally (and ethically) obligated to act in a way that benefits the client. Fiduciary fraud occurs when a fiduciary acts in his or her own self interest to the detriment of the client.

BREAKING DOWN 'Fiduciary Fraud'

There are plenty of obvious cases of fiduciary fraud, including Ponzi schemes, churning and so on. However, there are cases where the line is difficult to draw. For example, just because an advisor makes poor investments - and collects commissions - doesn't necessarily mean he or she is guilty of fiduciary fraud. In these cases, good faith measures and the prudent person rule are often applied to measure the advisor's intentions.

  1. Fiduciary

    A fiduciary is a person who acts on behalf of another person, ...
  2. Prudent Investor Rule

    A guideline that requires a fiduciary to invest trust assets ...
  3. Conflict Of Interest

    A situation where a professional, or a corporation, has a vested ...
  4. Fiduciary Abuse

    Describes a situation in which an individual who is legally appointed ...
  5. Prudent-Person Rule

    A legal maxim restricting the discretion in a client's account ...
  6. Fiduciary Risk

    A type of risk that accounts for the possibility of a trustee/agent ...
Related Articles
  1. Brokers

    Top Broker Excuses For Poor Investments

    It is not uncommon for investors to lose money through misselling or other forms of mismanagement.
  2. Personal Finance

    4 History-Making Wall Street Crooks

    Find out how these Wall Street high-rollers landed themselves in hot water.
  3. Investing Basics

    The Pioneers Of Financial Fraud

    These fraudsters were the first to commit fraud, participate in insider trading and manipulate stocks.
  4. Professionals

    Standards And Ethics For Financial Professionals

    Scandals and fraud have given financial professionals a black eye. Learn how to avoid typical ethical dilemmas.
  5. Personal Finance

    4 Dishonest Broker Tactics And How To Avoid Them

    Protecting yourself from unscrupulous practices means knowing how to spot them.
  6. Options & Futures

    The Chinese Wall Protects Against Conflicts Of Interest

    After the crash of 1929, this barrier helped define ethical limits, but it did little to prevent fraud.
  7. Investing

    In Search of the Rate-Proof Portfolio

    After October’s better-than-expected employment report, a December Federal Reserve (Fed) liftoff is looking more likely than it was earlier this fall.
  8. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  9. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  10. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  1. Are estate planning fees tax deductible?

    Estate planning fees may be tax deductible, but only if certain conditions have been met. Internal Revenue Service (IRS) ... Read Full Answer >>
  2. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  3. How much money does Texas make from unclaimed property each year?

    In 2014, the office of the Texas Comptroller of Public Accounts reported $234 million in unclaimed property claimant liabilities, ... Read Full Answer >>
  4. How much money does Michigan make from unclaimed property each year?

    According to the 2013-2014 Annual Report of the State Treasurer, the state of Michigan earned only $82,875 in abandoned and ... Read Full Answer >>
  5. Who decides if a financial security should be escheated?

    There is no one entity who "decides" to escheat assets. Rather, financial institutions are required to report inactive accounts ... Read Full Answer >>
  6. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center