The Fiduciary Structure of Investment Management Regulation

Research Handbook on Mutual Funds. (John D. Morley & William A. Birdthistle, eds.) (Elgar Publishing) Forthcoming

29 Pages Posted: 29 Jun 2017

Date Written: April 21, 2017

Abstract

Investment managers owe fiduciary duties to clients, including the duty of loyalty and the duty of care. A persistent question, with no clear answer, is what precisely is required by the duties of loyalty and care. In this paper, I argue that much of investment management regulation is a response by regulators to the uncertainty inherent in the fiduciary obligation. Regulators design investment management rules to guide managers regarding the proscriptions imposed by the duty of loyalty and the diligence required by the duty of care. Regulators, acting through agency rulemaking and enforcement actions, are attempting to specify what precisely is required of investment managers in the context of exercising their fiduciary obligation to clients. Viewing investment management law as I propose here leads to an important insight about the law, and it challenges an alternative view of the fiduciary obligation. Some writers claim that detailed conduct rules effectively displace fiduciary duties. By contrast, I argue that, far from being an alternative to fiduciary duties, investment management law and regulation serves to explicate what the fiduciary obligation entails. Rules prepared by regulators governing the investment management industry are not a substitute for a fiduciary duty; they compose its essence.

Keywords: fiduciary duty, fiduciary obligation, investment managers, asset managers, investment advisers, Securities and Exchange Commission

JEL Classification: K22, K23

Suggested Citation

Laby, Arthur B., The Fiduciary Structure of Investment Management Regulation (April 21, 2017). Research Handbook on Mutual Funds. (John D. Morley & William A. Birdthistle, eds.) (Elgar Publishing) Forthcoming. Available at SSRN: https://ssrn.com/abstract=2993429

Arthur B. Laby (Contact Author)

Rutgers Law School ( email )

217 North Fifth Street
Camden, NJ 08102
United States
856-225-6272 (Phone)
856-225-6516 (Fax)

HOME PAGE: http://https://law.rutgers.edu/directory/view/alaby

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