Legal Question in Investment Law in Illinois
Fiduciary duty
I invested money at the Northern Trust Bank, giving them ''total discretion'' to invest that money. I listed my risk tolerance as moderately aggressive, and specified that growth and maintainence of pricipal was my goal. The portfolio, almost $500,000, was in U.S.equities, and was almost always fully invested. From 1995 to 1997, while the stock market soared, my money made about two to three percent, my stocks were churned, the most junior manager was assigned to my account etc. The paper that I signed with the Northern is not designated as a contract or an arrangement. The first sentence reads: ''I request you as my agent to maintain in my name a Discretionary Investment Managmement Account for all cash, securities and other porperty which I may deliver to you from tome to time for credit to this account upon the following terms.'' It then says that the bank holds the funds, invests the funds etc. My question is does the bank have a ''fiduciary duty'' to invest my money in a reasonable way? Beause the paper I signed stipulates ''as my agent'', does that relive the bank of a fiduciary duty?
Thank you for the time taken to answer this question.
1 Answer from Attorneys
Re: Fiduciary duty
The short answer to your question is that, generally, "yes," a bank or brokerage house that undertakes discretionary trading authority also undertakes with it fiduciary duties that run to the investor. This, of course, is different from when an investor makes his own investment decisions and simply utilizes a bank or brokerage house to effectuate the investment or trade.
What I have just stated are general principles of law. The facts and circumstances of any particular case would dictate whether such a fiduciary relationship exists. For example, it is possible, although generally difficult, to establish that a fiduciary relationship exists even in the context of a bank or brokerage house that simply effectuates a trade or investment, where a particularly close relationship exists, the exact contours of which are too detailed for this short response.
Nonetheless, as a general principle, the bank in your situation would seem to owe you fiduciary duties.
Please note that this response is to a general question of law and is not intended to constitute legal advice with respect to any particular legal issue. No attorney-client relationship has been formed as a result of this communication.
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