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.

RELATED TERMS
  1. Self-Dealing

    A situation in which a fiduciary acts in his own best interest ...
  2. Fiduciary Rule

    Fiduciary rule is regulation that requires retirement advisors ...
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, ...
  4. Fiduciary Negligence

    A professional malpractice in which a person fails to honor his ...
  5. Named Fiduciary

    The fiduciary that holds responsibility over a given financial ...
  6. Fiduciary Certification

    The certification process to ensure that fiduciaries uphold the ...
Related Articles
  1. Financial Advisor

    Meeting Your Fiduciary Responsibility

    Being a fiduciary comes with a certain level of responsibility. These four steps will reduce your liability when managing other people's money.
  2. Investing

    Why Realtors Have Fiduciary Responsibilities

    Find out why real estate agents are considered to have a legal fiduciary responsibility to uphold the best interests of their clients.
  3. Managing Wealth

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  4. Financial Advisor

    Fiduciary Rule Impact: How it's Already Being Felt

    The fiduciary rule will be announced today but it's impact is already being felt. Here's how.
  5. Financial Advisor

    What You Need To Know About The Fiduciary Standard

    The financial industry has spent a boatload of money to prevent more stringent fiduciary requirements. Here’s what’s at stake.
  6. Financial Advisor

    Fiduciary Designations For Financial Advisors

    Attaining the AIF or AIFA could help both you and your clients enjoy a comfortable retirement.
  7. Financial Advisor

    How the New Fiduciary Rule Will Impact Investors

    The DOL's new fiduciary rule is now in effect. Here are a few areas where individual investors, including clients and prospects, might notice some change.
  8. Financial Advisor

    How SEC and DOL Fiduciary Standards Could Differ

    SEC fiduciary standards could differ from what the DOL has proposed, causing more confusion about the impact of the rule.
  9. Retirement

    An Introduction To Fiduciary Advisors

    Offering personalized solutions in a world of cookie-cutter advice may be your ticket to career perfection.
  10. Investing

    Why the Fiduciary Rule is Good for All Investors

    The new fiduciary standard should help lower what middle- and lower-income investors pay, on average, to brokers for retirement planning advice.
RELATED FAQS
  1. What is required to establish a fiduciary relationship between a financial advisor ...

  2. Is it permissible for an investment advisor representative employed by an SEC registered ...

          ... Read Answer >>
  3. Why do financial advisors have a fiduciary responsibility?

    Find out why financial advisors have a fiduciary duty to their clients, including what fiduciary duty entails and an example ... Read Answer >>
  4. Why is fiduciary duty so important?

    Find out why fiduciary duty is so important, including what this legal obligation entails and an example of how it can affect ... Read Answer >>
  5. What is fiduciary liability insurance, and what are its benefits?

    Understand what fiduciary liability insurance is, what companies or individuals can benefit from having it, and when it is ... Read Answer >>
  6. What are some examples of fiduciary duty?

    Understand what it means to be a fiduciary, under what circumstances fiduciary duties arise and some common examples of fiduciary ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center