Table of Contents
Top Question Asked
Is breach of fiduciary duty the same as fraud?
No. Fraud requires proof of intent to deceive or mislead. Breach of fiduciary duty can occur without intent when a broker or firm fails to act in the client’s best interests, violates loyalty obligations, or withholds material information needed for informed decisions.
A fiduciary duty is a legal obligation that requires a broker or adviser to act with undivided loyalty, putting the client’s interests first in every decision.
For brokers and investment advisers, that duty includes making suitable recommendations under FINRA Rule 2111, meaning advice that matches the client’s objectives, risk tolerance, and needs. Whether advice is given in writing, in conversation, or through a series of actions, brokers and advisers must ensure that any recommendation is suitable and in the client’s best interest under both fiduciary standards and FINRA Rule 2111. Breaches of this duty often cause substantial financial harm, and investors have the right to pursue claims in FINRA arbitration to recover those investment losses.
When a broker makes a recommendation that serves their own financial interest, ignores the client’s profile, or conceals conflicts of interest, they violate that fiduciary duty. At Altamirano PLLC, our fiduciary duty lawyers in New York represent investors nationwide in holding brokers, advisers, and the firms that employ them accountable for self-dealing, unsuitable recommendations, excessive or unauthorized trading, and other misconduct that breaches the duty of loyalty and care. Firms that fail to prevent such misconduct can be held liable through FINRA arbitration, the primary forum for resolving securities arbitration claims against brokers and brokerage firms.
“I was sold a large number of bonds that turned out to be a deeply flawed investment product. I trusted my former financial advisor because he held himself out as a fiduciary and assured me he would act in my best interest. When he recommended the bonds, he claimed they were safe because they were backed by life insurance policies.
After the investment failed and proved worthless, I searched online for information and discovered Attorney Jorge Altamirano’s record of success settling FINRA complaints against the brokerage firms whose representatives sold these bonds. I contacted him, and he filed a FINRA arbitration claim against the brokerage firm. He attained a settlement that exceeded my expectations. I am very grateful for the work Attorney Altamirano did on my behalf.”
Examples of Breach of Fiduciary Duty
Breach of fiduciary duty often occurs in combination with other forms of broker misconduct. Common patterns include:
- Failure to Understand the Investment or Strategy. Fiduciaries must know the features, risks, and potential outcomes of any product or strategy they recommend. Recommending something they do not fully understand violates the duty to provide informed, competent advice.
- Inadequate Due Diligence. Brokers and advisers are obligated to investigate an investment before recommending it. That means verifying its legitimacy, structure, and associated risks rather than relying on assumptions or sales materials.
- Unsuitable or Misaligned Recommendations. Advice must fit the client’s profile, including their objectives, risk tolerance, time horizon, and financial circumstances. A recommendation that conflicts with these factors breaches both suitability obligations and fiduciary duty.
- Incomplete or Misleading Disclosures. Fiduciaries must give clients the information necessary to make an informed choice. This includes a clear explanation of costs, risks, and any conflicts of interest, without omissions or misstatements.
- Putting the Fiduciary’s Interests First. Recommending investments that benefit the broker or firm over the client’s best interest, whether through commissions, fees, or proprietary products, violates the duty of loyalty.
Real Example: Multiple Allegations Including Breach of Fiduciary Duty
A FINRA member firm settled a customer’s arbitration claim alleging that, while registered with the firm, a broker engaged in excessive trading, unauthorized trading, unsuitability, breach of contract, breach of fiduciary duty, and negligence. The allegations painted a pattern of misconduct that placed the broker’s financial interest ahead of the client’s and violated the core obligations of loyalty and care.
How Breach of Fiduciary Duty Harms Investors
Breach of fiduciary duty can cause significant and lasting harm, including:
- Loss of principal due to unsuitable or self-serving recommendations
- Excessive fees and commissions from unnecessary trading or high-cost products
- Missed opportunities to invest in safer or more appropriate alternatives
- Exposure to undisclosed risks and conflicts of interest
- Erosion of trust in the investment relationship
When fiduciary duty is breached, the investor’s decision-making process is compromised. The resulting harm is often severe because the client relies on the fiduciary to act with honesty and loyalty.
Legal Standards That Apply
Several laws, rules, and principles may apply in breach of fiduciary duty cases:
- State Common Law – Most states recognize breach of fiduciary duty as a cause of action, often with higher remedies than negligence, especially in investment adviser fiduciary duty cases.
- FINRA Rule 2010 – Requires brokers to observe high standards of commercial honor and just and equitable principles of trade.
- FINRA Rule 2111 – The suitability rule; recommending investments not aligned with the client’s needs can breach fiduciary duty when a heightened duty exists.
- Rule 10b-5 – Federal antifraud provision; material misstatements or omissions with scienter can overlap with fiduciary breaches. Learn more about our approach to Fraud or Misrepresentation claims.
- State Securities Laws – Many states’ “blue sky” laws provide additional remedies for breaches of trust in securities transactions.
A fiduciary “best interest” standard aligns the interests of brokers and firms with those of their customers, better protects investors through consistent obligations, and demands that conflicts be eliminated or managed. It also requires firms to foster an ethical culture that prioritizes loyalty, transparency, and investor protection in every recommendation.
Fiduciary Duty Cannot Be Delegated Away
Brokers and firms each have their own fiduciary duty, and neither can avoid responsibility by pointing to the other. Firms cannot sidestep their own obligations by pointing to the individual broker, and brokers cannot excuse themselves by blaming the firm. Both are bound to act in the client’s best interests, avoid conflicts, and fully disclose material facts.
A fiduciary “best interest” standard aligns the interests of brokers and firms with those of their customers, better protects investors through consistent obligations, and demands that conflicts be eliminated or managed. It also requires firms to foster an ethical culture that prioritizes loyalty, transparency, and investor protection in every recommendation.
Our Approach to Breach of Fiduciary Duty Cases
At Altamirano PLLC, we investigate breach of fiduciary duty claims by examining account agreements, trading records, communications, and firm policies to identify the scope of the duty and uncover the conduct that broke it. We use that evidence to bring strong claims in FINRA arbitration, helping clients recover investment losses caused by fiduciary breaches.
We represent investors in cases involving, among others:
- Self-dealing and conflicts of interest
- Excessive or unauthorized trading
- Failure to disclose material risks or conflicts
- Unsuitable investment recommendations made under a fiduciary relationship
- Firm-level supervisory failures
Whether you are pursuing legal action for breach of fiduciary duty, investment fraud, or other broker misconduct, our focus is on investor protection and pursuing recovery of your losses. Speak with a New York fiduciary duty attorney from our firm to learn more.
Frequently Asked Questions About Breach of Fiduciary Duty
When does a broker owe a fiduciary duty?
Can I pursue a breach of fiduciary duty claim alongside unsuitability, negligence, or unauthorized trading?
Is breach of fiduciary duty the same as fraud?
What damages can I recover for breach of fiduciary duty?
- Compensatory damages – Also called actual damages, these are meant to make the investor whole for losses caused by the misconduct.
- Net out-of-pocket losses – The difference between what you paid for an investment (including commissions), factoring in dividends or interest, and what you received when selling it, if sold.
- Special or consequential damages – Losses tied to the wrongdoing, such as lost dividends, additional taxes, lost business funds, loss of financing, or excess commissions.
- Benefit of the bargain damages – The difference between what an investment was worth as represented and what it was actually worth.
- Well-managed account damages – The difference between your account’s performance and what a well-managed account with the same objectives would have earned.
- Rescission – Returning the parties to the position they were in before the wrongful transaction.
- Disgorgement – Forcing the broker or firm to give up profits or commissions earned through misconduct.
- Other equitable remedies – In limited cases, specific performance or other non-monetary relief.
Contact a New York Fiduciary Duty Attorney Today
If you believe your broker or brokerage firm breached their fiduciary duty, Altamirano PLLC can represent you in FINRA arbitration to recover your investment losses. We offer free consultations and do not get paid unless you recover.
Contact Jorge Altamirano, Principal of Altamirano PLLC:
One World Trade Center, 85th Floor
New York, NY 10007
(212) 220-6556
[email protected]
Call now or fill out the form below to get started. Securities claims are time-sensitive. Harmed investors are encouraged to act quickly and contact Altamirano PLLC to speak with an experienced securities lawyer.
