What are the laws regarding fiduciary duty?


Quick Answer

The U.S. fiduciary duty law, found in Title 29, Section 1104 of the U.S. Code, requires fiduciaries to execute their duties in conformity to trustee plans and applicable statutes, and with the welfare of beneficiaries and other pertinent parties as their primary focus, explains the Cornell University Law School. Because of this mandate, the law requires fiduciaries to, for example, keep administrative costs as low as possible and diversify trustee plan investments to minimize risk.

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Full Answer

The U.S. fiduciary duty law requires fiduciary actions to meet the prudent man standard of care, which assumes that people with comparable responsibilities and a similar level of knowledge would make similar decisions when faced with similar circumstances, notes the Cornell University Law School. The same law forbids fiduciaries from keeping the indicia showing ownership of plan assets outside the jurisdiction of U.S. district courts without relevant authorization.

The law also provides fiduciaries with certain protections, reports the Cornell University Law School. For instance, if a pension plan with individual accounts gives participants or beneficiaries control over assets contained in their accounts, and they take actions that result in losses, the law does not hold fiduciaries responsible. However, this regulation does not apply to situations where the ability of said participants or beneficiaries to control assets in their accounts is suspended by plan fiduciaries or sponsors.

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