A breach of fiduciary lawyer explains fiduciary duty and consequences of breach
The term fiduciary is derived from the Latin word fidere, which means “to trust.” A fiduciary obligation exists when one person is trusted to provide advice and take actions for the benefit of another.
A breach of fiduciary duty can give rise to civil liability. Civil lawsuits can have significant financial consequences, but will not result in jail time. In some cases, however, the same actions that constitute a breach of fiduciary duty are also crimes. You could find yourself fighting multiple legal battles on all fronts if you are accused of breaching your duty- and your freedom, finances, and professional life could all be at stake.
When you are facing legal action arising from a breach of fiduciary duty, you need an attorney who is prepared and ready to help you tackle all of your legal problems head-on. Bukh Law Firm, PLLC can provide invaluable assistance when a complaint for breach of fiduciary duty is made. Call today to schedule a consultation and learn more about how a breach of fiduciary lawyer can help you.
Definition of Fiduciary Duty
A fiduciary duty is a duty to act on behalf of another. A fiduciary is entrusted with important responsibilities, such as managing funds for someone else or handling the affairs of a business. The fiduciary is analogous to a trustee on the basis of the confidence that is placed in the fiduciary to correctly manage financial or business affairs.
A fiduciary duty is the highest duty of care that is owed. The fiduciary must act with scrupulous good faith. The fiduciary must be honest and candid about his dealings. Above all else, the fiduciary must be loyal and always make decisions with an eye towards benefiting the person or company to whom the duty is owed.
Within the investment and business world, there are many situations in which a fiduciary duty exists. A corporate officer or a company executive has a fiduciary duty to act in the best interests of the business and shareholders, rather than to enrich himself at the company’s expense. A stock broker or investment advisor also has a fiduciary duty to act in the best interests of clients. Accountants, attorneys, and many other professionals also have a fiduciary duty to their clients.
When Does a Breach of Fiduciary Duties Occur?
A breach of fiduciary duties occurs when the fiduciary fails in his obligations. This does not mean that every CEO or investment advisor who made bad choices or who gave inaccurate advice faces civil and criminal liability. The business judgment rule protects corporate executives and ensures they are not held responsible for decisions they made in the course of their work that turned out to be wrong.
When someone is accused of breaching a duty, the key question is whether the fiduciary was intending to benefit those to whom a duty was owed with the actions he took, or whether the fiduciary intentionally broke the trust relationship and acted on his own behalf.
If a fiduciary acted to enrich himself at the expense of the beneficiary, was purposefully dishonest in business practices, or otherwise did not live up to the duties of loyalty, candor, and disclosure, legal consequences can result.
What are the Consequences of Breach of Fiduciary Duty?
There are many situations in which a fiduciary faces consequences for breach of fiduciary duties. For example, shareholders can sue for breach of fiduciary duty when a corporate officer intentionally makes decisions that benefit the officer but harm the business and lower the value of stock shares. Investors can sue if their broker “churns” the account or makes excessive trades to run up commissions rather than to make money for clients.
A lawsuit may just be the start of legal problems when a fiduciary is accused of breaking the rules. Investment advisors and brokers can be reported to regulatory boards for their possession and can lose their license. Cases may be referred for state or federal prosecution, and law enforcement may conduct an investigation. As soon as any accusation is made regarding a breach of fiduciary duty, get an investment fraud lawyer on the phone to help you deal with any investigation and start planning your defenses.
Are Breaches of Fiduciary Duty Criminal?
A breach of fiduciary duty can run afoul of many different criminal laws. For example:
- Investment advisors who mislead their clients may not only be held responsible for a breach of fiduciary duty but may also be charged with securities and commodities fraud under 18 U.S. Code Section 1348.
- A CEO or CFO could be imprisoned under Sarbanes-Oxley for falsifying certain corporate financial reports or for certifying misleading corporate financial statements.
- An investment advisor who embezzles client funds or a CEO who embezzles company funds could face criminal charges for theft, fraud and embezzlement on the state or federal level.
- An individual who uses insider information to trade securities (insider trading) could be considered in breach of a fiduciary duty based on the insider’s relationship to the company. The insider could be charged with criminal insider trading under Section 10(b) of the Securities Exchange Act.
Whether a fiduciary duty results in criminal prosecution is going to depend upon whether the SEC, the FBI, the Department of Justice, or other state and federal agencies decide to pursue the case. The strength of the evidence is going to be a factor, and a federal prosecutor will need to convince a grand jury to hand down an indictment if you are to face federal charges.
When you are accused of a criminal breach, the consequences could include a lengthy jail sentence, having your assets frozen and then seized, required restitution and myriad other life-changing penalties. You need to get the help you need to fight the charges and try to avoid being convicted of breaking the law.
How Can a Breach of Fiduciary Lawyer Help?
Bukh Law Firm, PLLC has extensive experience representing clients in complex cases alleging breach of fiduciary duty, including CEOs, investment advisors, and other business and financial professionals. Call today to schedule a consultation and learn how our investment fraud lawyers can help you if you are facing civil or criminal proceedings.