Breach of Fiduciary Duty
When investors charge investment professionals, such as brokers and financial advisers with the responsibility to make investments in the best interest of the investor, the law imposes a fiduciary duty on investment professionals to act in the best interests of their client. This means that an investment professional is obligated act in a manner that is aligned with his/her client’s interests with loyalty, integrity and good faith.
When facing allegations arising from a breach of fiduciary duty claim involving a brokerage agreement, sound advice generally dictates that one seeks counsel as soon as there is any indication of dispute with an investor, Under New York law, the statute of limitations for breach of fiduciary duty claim is 6 years, thus providing an extensive period of time to file a claim. Based on this lengthy limitations period it is important seek counsel as soon as possible regarding any situations that may present a litigation risk.
State law governs a breach of fiduciary duty arising from brokerage agreement. For example, a brokerage agreement between an investor and brokerage firm located in New York will be governed by New York concerning when a breach occurred and the appropriate remedies for that breach. Under New York law, the elements of a breach of fiduciary duty claim are (1) that a fiduciary duty existed between plaintiff and defendant, (2) that the defendant breached that duty, and (3) damages as a result of the breach.
A party a Court deems to have been harmed by a breach of fiduciary duty will be eligible for compensatory damages, or damages to compensate for any loss that occurred because of the breach. In some rare and extreme cases, the aggrieved party may be awarded punitive damages to punish the breaching party and deter similar conduct in the future.
Much like a breach of contract defense, defending a breach of fiduciary duty claim relies on a number of affirmative defenses. Affirmative defenses to a claim for breach of fiduciary duty can include, (1) Lack of a fiduciary relationship; (2) Approval (for example, if the alleged actions where conducted with full disclosure and consent); (3) The fiduciary's actions were not motivated by an interest contrary to that of the other party) and (4) Due diligence.
Differences between State & Federal Charges (statutes, etc). *We are a NY based law firm so focus should be on NY. However, federal equivalents are a great addition.
State law dictates the conduct of parties under a brokerage agreement and any damages to be awarded in the event the agreement is breached. This applies to claims brought in Federal and State court.
Breach of fiduciary duty is one of the most common claims alleged by the investors according to arbitration statistics maintained by FINRA. Breach of fiduciary duty claims range from claims alleged by individual investors against a broker or financial advisor to large scale litigation by corporate entities or plaintiff classes against investment firms.