Fiduciary Duty

Who is a Fiduciary?

The concept of a fiduciary originated in AngloAmerican common law for cases in which one person entrusts property or other valuables to the care of another, and it remains a central concept in the law of trusts. The concept has evolved over time to cover other trustlike situations where one person has superior power and influence over another and that other [Page 891]person places confidence in or relies on that person. A fiduciary relationship, then, involves two elements: trust and confidence. Something is entrusted to the care of a person, and another has confidence that proper care will be taken.

That which is entrusted is most often property (land, for example) or assets (such as money or securities), but it can be anything of value, including information and power. Thus, a client may entrust valuable information to an attorney or an investment banker; or a person may entrust the power to make a certain decision to another, as when someone gives another person power of attorney. Indeed, guardians and agents are fiduciaries only in virtue of being delegated the authority to make decisions on behalf of another.

The concept of a fiduciary is of ancient origin. Certain positions of trust, such as trustee and guardian, were recognized in Roman law, and the word fiduciary, which derives from the Latin word for trust, dates from the 16th century. The position of agent, though, developed only in the 18th century, and a great expansion in the scope of fiduciaries occurred in the 19th and 20th centuries. This expansion occurred primarily in connection with the rise of a market economy and the modern corporation since they create a great need to rely on other individuals and on large institutions.

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