Three models of the bank's fiduciary duty

The Importance of Chinese Walls in Banks and Management of Information Flows

“…Third, the banks inform their fiduciary clients about the existence of such walls and how they are being used to prevent the misuse of client information. [15] Lastly, when Chinese walls are put in place, the banks prevent the regular transfer of employees from one department (in possession of confidential information) to another to maintain the efficacy of the walls. [16] Also, the banks take steps to educate and train employees about Chinese walls.…”

Regulatory Sloth and Activism in the Effervescence of Financial Crisis

“…Fiduciary duties can include those of care for clients and/or partners in a transaction and duties of loyalty to them. Legal aspects of fiduciary duties vary between common law (such as that of the United States) and civil law jurisdictions; it depends, of course, on the specific codes, situations, and any explicit contractual limitations or exclusions that might be in play (Brogden and Jones 2010; Plato‐Shinar and Weber 2008). That said, a minimum and less demanding duty would require a firm to ensure that the type of product being sold is broadly suitable for the client, in the sense that it seems to fit clients' risk profiles and sophistication (for U.S. and UK commentaries, see, for example, Slaughter and May 2010; Stabile 2010): broadly, exotic, opaque, or risky products should not be sold to most individual investors but may be sold to pension funds.…”

“…Such cases might be brought by public or private parties alleging that they had been harmed by financial products sold to them because of the information asymmetry in the provider–client relationship—or by national regulators seeking clarification on interpretation of EU law. No doubt there will be some such tests, which will invoke, inter alia , the provisions of the Markets in Financial Instruments Directive, or MiFID (European Union 2004), interpreted by some to mean that, “if conflicts of interest cannot be ruled out, an investment firm shall prevent them from adversely affecting its client [and] shall disclose them to its client before undertaking business on his behalf” (Plato‐Shinar and Weber 2008, 426). Whether in reality information asymmetries in the market are always leveled by disclosure, when conflict of interest exists and is connected to opportunities for sales, seems intrinsically unlikely.…”

“…Such views are neither novel nor surprising and, as this article and the other work cited suggest, the architecture and functioning of EU financial market regulation are such as to form the agenda accordingly (see above). After all, an investment bank “is not a charitable institution” (Plato‐Shinar and Weber 2008, 423), nor are financial regulators competition authorities in the sense of seeking to overcome information asymmetries where these might benefit “their” large firms (national champions).…”