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Tuesday, June 28, 2011

Fiduciary history

In the July issue of Research, my article "Fiduciary Matters," on the history behind the current controversy over whether brokers and financial advisors should be held to a uniform fiduciary standard requiring them to put their customers' interests before their own. Excerpt:
The word “fiduciary” derives from the Latin words for “faith” (fides) and “trust” (fiducia). Roman law recognized various fiducia contracts in which a person held property in safekeeping or otherwise acted on another’s behalf. Failure to uphold such trust could result not just in monetary penalties but also a formal “infamy” (infamia), in which you lost such rights as to hold public office or be a witness in a legal case.

However, the fiduciary idea arose well before Rome. The Code of Hammurabi, carved into stone in ancient Babylon, required a merchant’s agent to keep receipts and to pay triple damages for failing to provide promised goods (though it allowed an exemption if the loss was due to enemy attack during a journey).
Whole thing here.

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