Erik Gerding is right when he notes the importance of yesterday's hints by Senator Collins about imposing fiduciary duties on brokers. As Erik notes, "applying investment adviser-style fiduciary duties to broker dealers would be a sea change." Barbara Black discusses and criticizes recent Congressional moves in this direction.
Not only a sea change but, in my view, a misuse of the concept of fiduciary duties. As I've written, fiduciary duties properly apply only to situations involving the open-ended delegation of discretion and control over property. In this situation it is appropriate to depart from standards for arm's length dealings and impose a duty of unselfishness, as Justice Cardozo colorfully described it in Meinhard v. Salmon. In other contexts attempts to apply fiduciary duties result in mischief and confusion. Some broker-dealer relationships may be fiduciary in nature, but clearly not all of them, and even more clearly not the relationship between Goldman, IKB and ACA in the SEC's recent case.
He elaborates, with application to the recent Jones v. Harris mutual fund fee case.
