New York law holds that in certain relationships, a higher level of trust is called for between the parties. This increased level of trust can be a result of the inherent nature of the relationship or it can be specifically called for in an agreement between the parties. The relationship between a financial adviser and his or her clients can be one such type of relationship.
In a recent lawsuit, an asset management company agreed to pay more than $200 million in damages relating to allegations that it breached its fiduciary duty to investors. The company had allegedly concealed doubts it had about the business operated by Bernard L. Madoff, the famous Wall Street figure who is now in jail for operating a Ponzi scheme. The plaintiffs in the action allege that the asset management company continued to direct money to Madoff’s firm despite its suspicions because the company did not want to sacrifice the profits it was making.
While New York law typically only finds that a fiduciary duty exists in limited circumstances, the relationship between a financial adviser and a client is one such situation in which the duty may be imposed. In the case discussed above, a court would need to find that:
- A fiduciary relationship existed between the asset management company, as financial adviser, and the client.
- The asset management company breached its duty by failing to advise its clients of the concerns about Madoff’s firm that its due diligence had uncovered.
- The failure to share this information resulted in direct losses to the clients. In this instance, the alleged losses totaled more than $227 million.
Breach of fiduciary duty claims in New York can be tricky to assess. If you suspect that you might have a claim, it is vital that you seek the guidance of a New York business litigation attorney right away. To learn more, contact a New York breach of fiduciary duty lawyer today at (888) 497-3410.