The Fiduciary Obligations of Financial Advisors Under the Law of Agency

27 Journal of Financial Planning 42 (2014)

Harvard Public Law Working Paper No. 13-16

8 Pages Posted: 19 Mar 2013 Last revised: 6 Jun 2014

Robert H. Sitkoff

Harvard Law School

Date Written: November 4, 2013

Abstract

This paper considers how agency fiduciary law might be applied to a financial advisor with discretionary trading authority over a client's account. It (i) surveys the agency problem to which the fiduciary obligation is directed; (ii) examines the legal context by considering how the fiduciary obligation undertakes to mitigate this problem; and (iii) examines several potential applications of agency fiduciary law to financial advisors, including principal trades and the role of informed consent by the client, organizing the discussion under the great fiduciary rubrics of loyalty and care. This paper was sponsored by Federated Investors, Inc.

Keywords: fiduciary, agency, financial advisor, broker-dealer, investment advisor, agency costs, principal trades

JEL Classification: K12, K22, H30

Suggested Citation

Sitkoff, Robert H., The Fiduciary Obligations of Financial Advisors Under the Law of Agency (November 4, 2013). Harvard Public Law Working Paper No. 13-16; 27 Journal of Financial Planning 42 (2014); Harvard Public Law Working Paper No. 13-16. Available at SSRN: https://ssrn.com/abstract=2234830 or http://dx.doi.org/10.2139/ssrn.2234830

Robert H. Sitkoff (Contact Author)

Harvard Law School ( email )

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