Which Laws Protect Investors from Excessive Risks in Florida?

Which Laws Protect Investors from Excessive Risks in Florida?

August 2, 2017 • Uncategorized

Every investment is a risk on some level, although Florida has many procedures in place to ensure that your broker behaves ethically in making investment decisions. Most financial investments are managed by either professional investment companies, individual financial advisors, or trustees.

Trustees and fiduciaries in Florida are held to a high standard of care, and are required under law to administer a trust in “good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this code.” This requires ongoing diligence to diversify the financial account and make informed decisions regarding the trust and financial assets. Fiduciaries must take into consideration the following when making a financial decision:

• The interests of the beneficiaries
• Conflicts of interest
• The size of the trust
• The nature & duration of the fiduciary relationship
• The liquidity and distribution requirements of the trust
• Expected tax consequences
• Role of each investment to the overall investment strategy
• The asset’s relationship to the purposes of the trust
• The needs of any future distributions by beneficiaries
• The income and resources of the beneficiaries

A fiduciary and/or trustee must administer the trust as a “prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the trust…..the trustee shall exercise reasonable care, skill, and caution.” The failure to meet the standard of reasonable care in making brash investment decisions could have dire consequences on the investment. Courts have spent years determining what the “reasonable care” standard really is under state and federal law, and in most circumstances it is what would a reasonable fiduciary do in the same situation.

One of the first lessons any fiduciary learns is the requirement that all investments be diversified. Florida law requires a fiduciary to reasonably diversify investments, and it is a breach of duty for a fiduciary to failure to diversify financial accounts. However, a fiduciary may determine that it is in the best interests of the beneficiaries not to diversify, after taking into account the circumstances of the trust. This is a rare occurrence, and nearly all financial investments are diversified to prevent dramatic financial losses.

In addition to diversification and management as a prudent investor, a fiduciary must also manage the trust and investments on a daily basis, and is subject to the following duties:

• Duty to inquire
• Duty to keep informed on what is necessary for the trustee’s finances and review the investment portfolio
• Duty to defend against attack
• Duty to make the investment productive
• Duty not to mingle
• Duty of impartiality
• Duty to retain documents and keep records

As the beneficiary in an investment relationship, it is important to maintain ongoing contact with your broker or fiduciary. While fiduciaries have a legal requirement to make ethical and financial decisions regarding your investment portfolio, it is also up to you to continue to monitor all activity. If you have suspicions that your fiduciary is not acting in your best interests, it is important to bring legal action against them to prevent any substantial loss of your finances. Fiduciaries have a legal obligation to act in your best interests, and the breach of this duty could have dire legal ramifications on the fiduciary and your financial investment.

If you suspect that your fiduciary or broker is not acting ethically, and is not acting in your best interests, you have the opportunity to achieve legal recourse for their actions.