Fiduciary Negligence

DEFINITION of 'Fiduciary Negligence'

A professional malpractice in which a person fails to honor his or her fiduciary obligations and responsibilities. Fiduciary negligence occurs when a fiduciary fails to act on breaches of fiduciary duty when his or her actions could have prevented the infractions.

BREAKING DOWN 'Fiduciary Negligence'

Suppose that a company's shareholders entrust their funds with the firm's management. If the company's employees are embezzling money or expensing funds on lavish dinners and gifts and the chief financial officer fails to check the financial accounts, allowing such infractions to go unnoticed, that officer would be considered negligent and held accountable even if he or she did not benefit from these actions.

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