A fiduciary is someone who has control of other people’s money. The law imposes special duties on those persons. They are not always defined duties. Rather, this concept sets an overall requirement that subjects a fiduciary to high standards of conduct in all his dealings with customers.
The level and nature of fiduciary duties will increase with the amount of control exercised over a client’s investments. This makes it even more difficult to set defined standards. High ethical standards, however, will assure that fiduciary duties are observed.
The concept of fiduciary duties stems from the law of trusts.
At least one scholar traced the trust concept to 170 B.C. Others claim that the concept rose from fifth-century German law or from concepts developed under Islamic law and transported to England by the returning Crusaders.
In any event, the concept of trust was firmly cemented into English law by statute in 1536. The trust concept was further developed in England where courts went so far as to claim that the trust relationship is a principle of humanity and exists for the preservation of mankind.
Since trusts are in their essence a social institution, the courts easily expanded the trust. By applying fiduciary principles, a court could stop injustice, set aside transactions that were unfair or inequitable, and address wrongdoing and unfairness between a fiduciary and his client.