The Role of Fiduciary Duty in the Impeachment Process

On September 24, the specter of impeachment became a reality, as the House began its official inquiry. The case for impeachment may involve whether the president breached his fiduciary duties, so it is appropriate to reflect on the relationship to the advisory profession.

Fiduciary duties seek to prevent abuses of power in relationships of trust and confidence of unequal parties, in both private relationships and public service.

Boston University Professor of Law Emeritus Tamar Frankel, a noted scholar of fiduciary practices, says trust requires speaking truthfully and doing what you say you will do. In her book, Fiduciary Law, she noted parallel duties in the private and public sectors, ”The Founders were acquainted with standards of fiduciary law (and) the United States Constitution is the fiduciary duty of public power and that private sector fiduciaries and government officials have much in common.”

Abuses of power have been all too commonplace in 2019. Prominent universities were caught in an admissions scandal. The halls of power in Washington are under siege with serious allegations.

The SEC says new rulemakings and interpretations, including Reg BI, “enhance protections and preserve choice for retail investors.” Yet these measures were widely panned with negative reviews from scholars, advisor groups, state securities administrators and consumer groups.

In SEC roundtables and survey research, investors openly and emphatically expressed concerns and disagreement with the SEC’s views. A key takeaway: Investors know what they want; this rulemaking doesn’t deliver. No wonder trust and confidence seem beyond reach.

It’s not always been like this. The July 1969 Moon landing, “a giant leap for mankind,” as Neil Armstrong said, was re-lived this summer. That achievement was a reminder of an epic event that inspired hope, optimism and trust in institutions, government, science and technology.

Two thirds of the today’s adult population probably recalls a time when trust prevailed. The Gallup Poll has recorded trust over decades. In 1979, 60% expressed trust in banks and 30% do now; 80% in medicine and 36% today; 43% in Congress and just 11% today. Those dismal trust levels matter, but are hardly discussed.