• Fiduciary Obligations of Overview


• Fiduciary Obligations of Duties


• Fiduciary Obligations of Employees


• Fiduciary Obligations of Picking Estate


• Fiducairy Obligations of Dilemma


• Understanding The Financial Crisis


• Behavioral Finance: The Role of Psychology


• The Hidden History of the Financial Crisis


• Financial Reporting & Analysis


• Introduction to Financial Derivatives

Fiduciary Obligation - Fiduciary Duty

Under the common law of most jurisdictions, including Texas, agency is also a special relationship that gives rise to a fiduciary duty. The Restatement (Second) of Agency sets forth in general terms the concept that "unless otherwise agreed, an agent is subject to a duty to his principal to act solely for the benefit of the principal in all matters connected with his agency." In elaborating on the extent of this fiduciary duty, the Restatement (Second) says:

The agreement to act on behalf of the principal causes the agent to be a fiduciary, that is, a person having a duty, created by his undertaking, to act primarily for the benefit of another in matters connected with his undertaking. Among the agent's fiduciary duties to the principal is the duty to account for profits arising out of the employment, the duty not to act as, or on account of, an adverse party without the principal's consent, the duty not to compete with the principal on his own account or for another in matters relating to the subject matter of the agency, and the duty to deal fairly with the principal in all transactions between them.

In cases in which an agent diverted an opportunity from the principal or engaged in competition with the principal, the agent or an entity controlled by the agent profited or benefitted in some way. An agent had a fiduciary duty to disclose this arrangement in its entirety and to disgorge any compensation he received from the seller, even though the principal was willing to pay the full price desired by the seller.

However, courts have been and should be careful in defining the scope of the fiduciary obligations an employee owes when acting as the employer's agent in the pursuit of business opportunities. While there are some overly broad statements to the effect that an associate owes a fiduciary duty to his or her firm based merely on the employment relationship.

An at-will employee may properly plan to go into competition with his employer and may take active steps to do so while still employed. Such an employee has no general duty to disclose his plans to his employer, and generally he may secretly join other employees in the endeavor without violating any duty to his employer. The general policy considerations are that at-will employees should be allowed to change employers freely and competition should be encouraged. If an employer wishes to restrict the post-employment competitive activities of a key employee, it may seek that goal through a non-competition agreement.