Multi-Million Dollar Advocates Forum
Virginia State Bar
Maryland Flag
DC Bar
Virginia Trial Lawyers Association
Million Dollar Advocates Forum

Breach of Fiduciary Duty

What Is Breach of Fiduciary Duty Regarding Securities and Investments?

A "fiduciary" is an individual or entity that is placed in a position of trust. In a securities and investment context, fiduciaries owe their customers duties of care, good faith, fair dealing, trust, impartiality, loyalty, and integrity. Unfortunately, as set out below, investment fiduciaries can breach their duties to their customers in a number of ways.

If you believe your financial advisor or broker breach their fiduciary duty to you causing you losses, you should contact one of our attorneys as soon as possible.

Financial advisors to public customers may fall under one of two regulatory umbrellas (or both). They may be either a FINRA registered representative working for a Broker-Dealer (securities brokerage firm), or they may be an Investment Advisor Representative working for an Registered Investment Advisor (RIA) firm.

Registered Investment Advisors are considered fiduciaries under federal law, and typically under state law and regulations. For example, Virginia Securities Regulation 21 VAC 5-80-200(A) explicitly states: "An investment advisor or federal covered advisor is a fiduciary and has a duty to act primarily for the benefit of his clients." Section B of the regulation further applies this duty to investment advisor representatives.

FINRA registered advisors may also be considered fiduciaries under state law explicitly, or based on the circumstances and relationship with their customer. For example, see the following Virginia cases:

  • In Cook v. John Hancock Life Ins. Co., Civil Action No. 7:12-cv-00455 (W.D. Va., 2015), the Court found: "A fiduciary duty, however, can exist independently of contract." 
  • Hamby v. St. Paul Mercury Indem. Co., 217 F.2d 78, 80 (4th Cir. 1954) ("The [fiduciary] relation arises whenever the property of one person is placed in charge of another.).
  • “A fiduciary relationship exists in all cases when special confidence has been reposed in one who in equity and good conscience is bound to act in good faith and with due regard for the interests of the one reposing the confidence.” Augusta Mut. Ins. Co. v. Mason, 645 S.E.2d 290, 274 Va. 199 (2007), H-B Ltd. P'ship v. Wimmer, 220 Va. 176, 179, 257 S.E.2d 770, 773 (1979).  

In addition, in 2019 the U.S. Securities and Exchange Commission (SEC) issued Regulation Best Interest (Reg BI), 17 CFR § 240.15l-1, which became effective June 30, 2020. The regulation applies to recommendations of securities transactions or strategies to retail customers by Broker-Dealers (FINRA registered brokerage firms) and their financial advisors (associated persons or registered representatives).

The standard under Reg BI is very similar to one that would be applied to a fiduciary - the recommendation must be in the best interest of the customer. The regulation further requires that the recommendation be made "without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker or dealer making the recommendation ahead of the interest of the retail customer."

Breaches of fiduciary duty by either an RIA or FINRA representative broker may include making unsuitable recommendations, trading without authorization, failing to disclose risk, failing to disclose conflicts of interest, misstating risk, churning an account for personal gain, stealing monies from a customer, recommending an investment to earn a higher fee or commission, or selling investments without understanding their risks.

Fiduciaries of ERISA pension plans are subject to the fiduciary requirements of ERISA. 29 U.S.C. § 1104 imposes a prudent man standard of care and requires that "a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and- (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan."

The attorneys at Greco & Greco have filed many FINRA arbitrations over the past 25 years involving breaches of fiduciary duty owed to customers. If you believe that your broker / financial advisor or brokerage firm has engaged in unauthorized trading in your securities / investment account, please contact Scott Greco for a free attorney consultation.

Our Virginia securities fraud lawyers represent individuals from all states across the country and have decades of experience protecting the rights of customers, and holding securities firms responsible for the acts of their brokers, advisors, and fiduciaries.

Client Reviews
“Greco & Greco represented me several years ago in a case in which my financial planner ignored my investment guidelines in making several very risky investments in my name. This individual was employed by a very large financial services corporation which refused to return my funds. I retained Greco & Greco.This after a few months resulted in a face to face negotiation with a team from the corporate office which supported the financial planner. After several hours including many strategy breaks and rejected offers a satisfactory settlement was reached. Without the skilled representation of Greco & Greco we would not have won such a settlement. I was very pleased with all aspects of their service including their timely feedback throughout the case.” J. W.
“Very professional and compassionate representation by this firm. Communication was clear and concise. This firm has a high degree of integrity and knowledge of SEC law. Highly recommend.” C. A.
“Very good attorney - client communication. Great legal representation. Satisfying results. A. W.
“Scott Greco was very professional, and honest. I highly recommend this firm. Scott Greco explained everything in a way I could understand, and I never left the office with unanswered questions. If I ever need any other legal representation Greco & Greco, P.C will be my only choice.” Anonymous
“W. Scott Greco represented me in my attempt to recover money lost in a ponzi scheme. He kindly and skillfully guided me through the process of submitting the required documentation of loss, provided sound legal advice regarding accepting arbitration, and kept me fully informed as the case moved forward. As a result of his work on my behalf, I recovered a large portion of my lost funds. I would absolutely, without reservation, recommend this firm to others.” Anonymous