Tamar Frankel – The Regulators Do Not Understand Conflicts
Click here to listen to a podcast commemorating the 80th anniversary of the 40 Act and the future of the fiduciary standard, featuring Knut Rostad, Ron Rhoades and Jim Allen.
Tamar Frankel may well be the godmother of fiduciary law in the West. Born in Israel, Professor Frankel earned her first legal certificate in Jerusalem in 1948. An L.L.M. and S.J.D followed from Harvard Law School in 1964 and 1972. For 48 years she taught generations of students and regulators while writing extensively at the Boston University School of Law. Today professor Frankel is professor of law emerita.
I spoke with her on August 28.
You have written about the origins of fiduciary law, from Hammurabi to Roman law and
In England in the Middle Ages. What should regulators and policymakers take away from this History? Why does it matter?
The most effective way to destroy any healthy and lasting economy and financial system is to relieve intermediaries – whether advises, brokers, bankers, or others – of a duty to be trustworthy. That means to relieve them of the obligation to do what they promise to do for the benefit of their clients. If they have conflicting interests, they must tell the clients about these conflicts, in understandable language. If a client does not understand the conflict, then the adviser must either eliminate the conflict or resign from advising the client. Here is the importance. The history is revealing. The history of every financial disaster tells the same story. It has at its roots breaches of fiduciary duties.