Investment Banks as Fiduciaries: Implications for Conflicts of Interest
41 Pages Posted: 4 Jan 2006 Last revised: 11 Feb 2011
Investment banks play an intermediary role in the financial system that is integral to its efficient operation. A core, and highly visible, part of their work involves providing financial advisory services to institutional clients on transactions that have strategic importance, such as mergers and acquisitions. As these services are but one aspect of the broad and diverse range of financial services that investment banks typically provide, challenges such as conflicts of interest inevitably arise. Somewhat anomalously, the question of whether these firms owe fiduciary duties to their clients when providing financial advisory services has received little regulatory, judicial or scholarly attention. This essay will address that question, consider the parameters of any fiduciary obligation to avoid conflicts of interest that may arise and discuss the implications of their responses to these conflicts.
Keywords: Investment banks, merchant banks, financial advisory services, investment bank advisors, fiduciary duty, identifying fiduciary relationship, conflicts of interest, change of control transactions, mergers, acquisitions, duties of investment banks, regulation of investment banks
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