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When an individual decides to invest their money, whether in a bank, stock market, retirement plan, etc., they entrust it to an individual who must abide by legal responsibilities and duties, which are considered good faith and candor. Additionally, these responsibilities are also known as fiduciary duty. While there are a number of facts and circumstances generally defining fiduciary status, it is commonly known as an individual who "manages the property or financial control in a professional environment". When an investor gives their broker discretionary authority, that individual authorizes the broker to make investments without consulting the investor. If the broker has this discretionary authority or "control" over an investor's account that person may owe the investor a fiduciary duty. A broker with fiduciary responsibilities and duties must enter investment decisions with care and caution. Determining fiduciary liability is comprised of prudent investment practices by the fiduciary rather than overall performance. However, because of the degree of trust reposed in a fiduciary, a fiduciary is generally held to a very high standard of honesty and integrity within the scope of the relationship. Following Security Exchange Commission (SEC) regulations/guidelines, investment advisors owe their clients an ongoing fiduciary duty to provide full and complete disclosure of all fees and any conflicts of interest. Part of a broker's responsibility is to individually assess a client's available risk and monetary goals when determining investments. To decide whether the broker should be held liable for advice, it is necessary to determine whether the investment advice was suitable for the client and whether the investment professional, bound to a fiduciary duty, acted in the client's best interests. All investment advisors should ask clients for complete documentation that outlines their risk profile and investment goals. Then the advisor is duty-bound to help ensure that the investment choices selected remain consistent with the outlined and agreed profile and goals. If any investment advice provided by a broker, that a client believes caused losses because it was inappropriate according to their personal investment profile/goals, should immediately contact legal advisors for guidance and direction. Investors may be compensated for losses if it is proven that the broker's suggestions were not within the specifications included in the risk profile, and/or that the financial risks involved were not disclosed.
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