When does a broker owe a fiduciary duty?

A fiduciary duty can arise in many circumstances, including when a broker has discretionary authority over an account, serves as an investment adviser, or has otherwise established a relationship of trust and confidence with the client. In a discretionary account, the broker can make trades without first obtaining the client’s approval, which carries heightened duties. Even in a non-discretionary account, brokers must make recommendations that are suitable for the client’s objectives, risk tolerance, and overall circumstances. Certain states, including California, Florida, and Missouri, have recognized that a fiduciary duty can arise in non-discretionary accounts when the broker’s role extends beyond executing trades and involves a relationship of trust and confidence.