Fiduciary Liability Exposure Areas

Fiduciary Liability Exposure Checklist

List of potential pitfalls for Board Members and Trustees and for Attorneys, Business Managers and CPAs related to Clients who serve as Trustees or Board Members

Before getting into the heavy stuff, please allow us to offer a practical tip; food accompanied by alcohol and fiduciary duty tend not to mix. Considering the serious nature, gravity and implications (and the reality that trust beneficiaries, such as family members, shareholders, or students, organization members, grantees, eleemosynary organizations et al are relying upon your prudence) when conducting board of directors, committees thereof, trustee or trust work it’s best to put off lavish meals and especially alcohol until after the work is done, if at all. (Is spending monies on lavish food, drinks or desserts or expensive off-site retreats a prudent and necessary use of funds in the first place?) And as always, ask yourself: are you gathering sufficient, independent, non-conflicted information, and acting prudently in the best interests of those who are expecting and relying upon you to do so? If you have questions please contact us; it counts as independent due diligence.

Board members or trustees occupy positions of trust and are personally and collectively responsible for carrying out the purpose and mission of the authorizing instruments. Entire boards, committees thereof or individual board members may reach out to us for an independent assessment of acts and omissions and prudent prophylactic solutions, or in the event of litigation, potential mitigating shields against prosecution, lawsuits, and judgments. Timely raising concerns or uncertainties around activities by boards, other board members or trustees or third party vendors are usually helpful.

Review, observance and continuing education related to applicable rules of professional conduct paying particular attention to potential conflict of interest disclosure requirements such as for Attorneys here and CPA PFPs here

Providing investment advice to clients whether or not you receive compensation or benefit directly or indirectly

Drawing the line between investment advice and legal, financial or tax advice

Serving as trustee for a client who prefers heirs or potential beneficiaries not to be involved or otherwise

Recommending any broker/dealer, bank, financial institution, investment, stockbroker, financial planner, insurance carrier or insurance or annuity agent to a trustee then failing to monitor the situation; among other things, personnel turnover happens, communication and compliance may erode, risk and losses may mount.

Receiving any remuneration, benefit and or compensation for referrals, investments or insurance, etc.

An important note on referrals to financial advisors. We have seen first hand alarming irregularities, including widespread multi-level gaps, blatant disregard and failures of basic sound business practices and critical fundamental customer protection measures while assisting on several high profile professional athletes’ claims against a major bank and affliated specialized wealth management unit of a related broker dealer leading to multi-million losses. Any and all referrals to financial advisors should be carefully monitored.

If the requisite experience and skills including specific securities, fiduciary and compensation expertise to conduct monitoring is not available in – house; legal counsel, tax practitioners, business managers and CPAs may contact us for an appropriately scoped practice and or client fiduciary account review process and evaluation.

We can help insulate your professional practice:

Identify potential fiduciary risk exposure areas in your practice

Review E&O insurance for coverage or exclusions related to investment fiduciary and or securities activities

Inform clients who act as trustees of their personal fiduciary duties, responsibilities, personal liability and independent, no-conflict fiduciary consulting and training available from us

Alert clients of their personal potential fiduciary liability before they accept a trustee or board position on a for-profit, corporate, non-profit, foundation or endowment, no matter how “prestigious” (Examples include institutions allegedly connected to Mr. Jeffrey Epstein, the College Admissions “Varsity Blues” and the Recording Academy matters)

Become familiar with federal and state laws concerning investment fiduciary standards of care:

Uniform Prudent Investor Act (UPIA)

Uniform Fiduciary Principal and Income Act (UFPIA)

ERISA, Taft-Hartley Act (Union, multi-employer plans)

Uniform Management of Public Employee’s Pension Systems Act (state, county, city plans) (UMPERs)

Uniform Prudent Management of Institutional Funds Act (UPMIFA)

And applicable state, local and federal rules, regulations, reporting and disclosure requirements

We can help insulate your professional practice:

• Identify potential fiduciary risk exposure areas in your practice
• Review E&O insurance for coverage or exclusions related to investment fiduciary and or securities activities
• Inform clients who act as trustees of their personal fiduciary duties, responsibilities, personal liability and independent, no-conflict fiduciary consulting and training available from us
• Alert clients of their personal potential fiduciary liability before they accept a trustee or board position on a for-profit, corporate, non-profit, foundation or endowment, no matter how “prestigious” (Examples include institutions allegedly connected to Mr. Jeffrey Epstein, the College Admissions “Varsity Blues” and the Recording Academy matters)
• Become familiar with federal and state laws concerning investment fiduciary standards of care:
• Uniform Prudent Investor Act (UPIA)
• Uniform Fiduciary Principal and Income Act (UFPIA)
• ERISA, Taft-Hartley Act (Union, multi-employer plans)
• Uniform Management of Public Employee’s Pension Systems Act (state, county, city plans) (UMPERs)
• Uniform Prudent Management of Institutional Funds Act (UPMIFA)
• And applicable state, local and federal rules, regulations, reporting and disclosure requirements

In nearly every dispute, whether trust or non-trust account, IRA, ERISA pension retirement benefit or IRS code section 401k, 403b, 457 plan, charity, non-profit, foundation or endowment (eleemosynary) account preventable prudence gaps can often be rapidly remediated supported with a prudent monitoring process.

It’s best, see FACE Audit™ if we can be retained prior to the establishment of the new account (or new advisory) relationship to help prevent these types of situations When lawsuits or claims are contemplated we prefer to be involved at the earliest opportunity prior to filing.

For concerns related to potential breach of fiduciary duty, self-dealing, conflicts of interest, stockbroker, financial planner, financial advisor, wealth manager, board or investment committee or trustee malfeasance or FINRA, SEC and securities industry violations custom, practice, policies and or procedures and or state, local, or federal rules and regulations please contact us.

Since 2003, prudent professionals seek an independent, no-conflict, third party opinion from us; it counts as due diligence.

For more information contact@fiduciaryexpert.com or (310) 943 – 6509

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