13.1 Fiduciary Duty
Fiduciary duty is the cornerstone of investment adviser regulation under SEC Release IA-1092 and NASAA Model Rules, requiring uncompromised loyalty and transparency.
Key NASAA Exam Takeaways
- Investment advisers are fiduciaries held to the highest standard of conduct: Duty of Care and Duty of Loyalty.
- Duty of Loyalty requires putting client interests ahead of firm and personal interests in all matters.
- Conflicts of interest must be eliminated where possible, and fully disclosed in writing on Form ADV Part 2A when they cannot.
- Broker-dealers are historically held to suitability standards (and Reg BI), whereas Investment Advisers are held to fiduciary standards.
Interactive Knowledge Checkpoint • Section 13.1
An investment adviser identifies an attractive investment opportunity that aligns perfectly with a client's portfolio objectives, as well as the adviser's personal trading account. Under fiduciary standards, what action must the adviser take?