Fiduciary Duty and the Market: Private Law and the Public Good
17 Pages Posted: 31 Jul 2008
One of the key goals of securities regulation is to maintain confidence in financial markets. That confidence depends in part on participants in the market believing that others act with integrity - including that securities intermediaries (such as broker/dealers, advisers and CIS operators) act in furtherance of their clients' interests, rather than their own, in discharging their functions in those markets. Securities regulators and regulatory systems have adopted various approaches to ensuring the (actual and perceived) loyalty of intermediaries to their clients' interests, including treating securities intermediaries as fiduciaries or seeking to subject them to 'fiduciary-sounding' statutory duties in relation to conflicts of interest. In Australia, the 'intermediaries as fiduciaries' approach was recently tested in Australian Securities and Investments Commission v Citigroup. This paper argues that ASIC v Citigroup usefully illustrates some of the difficulties of adopting the (private) law of fiduciary duty as either a means or a model for realizing the (public) good of confidence in the integrity of securities intermediaries.
Keywords: Securities intermediaries, fiduciary duty, securities regulation
JEL Classification: G28, K22
Suggested Citation: Suggested Citation