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Arthur B. Laby

Over the past several years, fiduciary scholars have developed several competing accounts of the fiduciary obligation. Studying these accounts leads to a more complete understanding of the fiduciary relationship and the obligations imposed on fiduciaries. In previous work, I presented an account of the fiduciary obligation as a duty by the fiduciary to adopt the principal’s ends. Under the “adopting” account, the fiduciary obligation can be viewed as a duty by the fiduciary to adopt the goals, objectives, or ends if the principal and act accordingly. This chapter clarifies and extends the account, and it replies to objections raised by Professors Stephen Galoob and Ethan Leib. In contrast to the adopting account, Professors Galoob and Leib have articulated a “shaping” account of the fiduciary obligation. Under the shaping account, the fiduciary duty shapes the fiduciary’s deliberations vis-à-vis the principal and a fiduciary whose deliberations are not shaped in the way Professors Galoob and Leib describe does not comply with her fiduciary duty of loyalty. This chapter maintains that the demands the shaping account places on a fiduciary are insufficient – they are inconsistent with fiduciary doctrine and with the custom and practice of fiduciaries. This chapter also addresses objections posed by Professors Galoob and Leib, namely that the adopting account permits morally illicit ends and that it permits accidental compliance. Finally, the chapter examines illustrations used by Professors Galoob and Leib to demonstrate that the adopting account is the more complete account of fiduciary obligation.

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Arthur B. Laby

The chapter examines the fiduciary structure of investment management regulation. Specifically, it addresses the relationship between investment managers’ fiduciary obligations and regulators’ efforts to control the investment management industry through rules and enforcement actions that constitute the bulk of fund law. Laby argues that much of that body of law is a response by regulators to the uncertainties inherent in the fiduciary obligation. On a broad series of issues, it is contended, regulators attempt to specify the precise fiduciary obligations of managers as they exercise their duties to clients.