Fiduciary

General Definition

The traditional definition of a fiduciary is a person who occupies a position of trust in relation to someone else, therefore requiring him to act for the latter's benefit within the scope of that relationship. In business or law, we generally mean someone who has specific duties, such as those that attend a particular profession or role, e.g., financial analyst or trustee.

Legal Considerations

A fiducial relationship does not exist simply because someone places his trust in another person. One must have a reasonable basis for placing his trust in someone, one that arises from the facts that pertain to that relationship. A court ruled, "Mere respect for the judgment of another or trust in his character is not enough to constitue such a relationship. There must be such circumstances as indicate a just foundationfor a belief that in giving advice or presenting arguments one is acting not in hhis own behalf, but in the interests of another party." (Cranwell v. Oglesby, 12 N.E. 2d 81, 299 Mass. 148, 1937).

Professions

Members of various professions such as physicians, architects, and lawyers, have highly specialized training and often possess credentials that enable them to claim expertise in a particular field. This claim would tend to constitute a reasonable basis of trust on the part of others who avail themselves of their services, thereby placing the professional in the position of a fiduciary. Most professions are subject to specific codes of conduct prescribed by law or independent credentialing authorities (e.g., bar associations or universities).

Other Roles

Understood in its broadest terms, one can imagine a number of other fiduciary positions that arise from particular kinds of relationships, for example, the relationship between employers and employees, investment managers and investors, parents and children, and so forth. In each case, there the person who is the fiduciary acts for the benefit of people who have a reasonable basis of placing their trust in them based on the scope of the relationship and the explicit or implict agreement between the parties as to the terms that govern the relationship.

Moral Fiduciary

Some philosophers (see, for example, Michael E. Berumen), argue that everyone who is a moral agent is also a moral fiduciary, because he has a responsibility towards others, namely, to conduct himself in accordance with moral rules, and that others have a reasonable basis for expecting such behavior.

General Fiduciary Duties

The following are encapsulations of duties outlined in Berumen's Do No Evil: Ethics with Applications to Economic Theory and Business, which would seem to apply to all fiduciary relationships:

Fiduciaries are responsible for ensuring that they have the necessary knowledge to perform in accordance with their capacity.

Fiduciaries must disclose any limitations, conflicts of interest, or barriers to performing their duties.

Fiduciaries must comply with any legal and professional requirements pertaining to their roles, and also with any relevant moral strictures.

Fiduciaries must not take unfair advantage of their relationship (e.g., misuse information) that could have deleterious effects on those who place their confidence in them.