Fiduciary Duty Research Articles

Insider Trading and Law Enforcement in the Capital Market

Illegal stock trading, or insider trading, has become a significant issue in the capital markets, both in Indonesia and the United States. This research aims to compare law enforcement related to insider trading between the two countries. This research uses a normative method with legislative and conceptual approaches. Data was collected through analysis of laws and regulations and case studies related to insider trading practices. The findings show that the regulations in the UUPM in Indonesia still use the fiduciary duty theory, which limits the scope of actions that can be sanctioned. In contrast, in the United States, the application of the fiduciary duty theory and misappropriation theory provides stronger legal protection and stricter sanctions against insider trading offenses. Although both countries have regulations prohibiting insider trading, the enforcement mechanism in the US is more comprehensive than in Indonesia. In the US, there are more legal precedents that clarify limits and sanctions, while in Indonesia, there is still a lack of implementation and understanding of insider trading. Enforcement of insider trading laws in the US is more effective than in Indonesia. The UUPM in Indonesia needs to be revised to integrate the misappropriation theory and strengthen sanctions against insider trading violations, in order to provide better protection to investors.

Medical silos, social identity, and duty of care: A call for health leaders to improve transitions of care.

This article explores the concept of medical silos, particularly within hospital systems, and examines their deeper roots in social identity and the fiduciary duty of care of healthcare providers. While traditional perspectives focus on informational and communication barriers, this analysis highlights how professional identity and moral obligations contribute to the persistence of silos. Social identity theory reveals that strong in-group affiliations, formed during medical training and specialization, fosters collaboration within groups but also create divisions between them. Similarly, the fiduciary duty of care, central to ethical medical practice, may inadvertently reinforce silo boundaries in resource-limited environments. By emphasizing the role of centralized leadership, the article proposes that health system managers and leaders, with the broadest possible duty of care, must take action to dismantle these barriers. Recommendations include re-evaluating policies for patient transitions and fostering integrated care pathways to improve overall system flow, rather than simply balancing the agendas of stakeholders within their silos.

Conflict of interest in the securities market

In the article examines the problem of applying the legal interpretation of the concept of “conflict of interest,” including as applicable to legal relations in the stock market. Such concepts as the fiduciary duties of a trustee, the controversial nature of the legal definition of a conflict of interest through the concept of personal interest are considered. The need for further development of the prudential regulation system and a more specific definition of the criteria for the fiduciary duties of the principal in the securities market are substantiated. The possibility of introducing into Russian practice the approach used in the common law system is analyzed. According to this approach, only proof of the fact of dishonest fulfillment of fiduciary duties, such as loyalty, due diligence and information duty can serve as a basis for prosecution in the event of a conflict of interest, but not the establishment of the fact of personal interest. In particular, from this point of view, the fundamental rule of the common law system applied in the stock market is considered — to fully rely on the information (i.e., a situation completely opposite to the approach that has developed in Russian law in relation to identifying conflicts of interest) provided by the broker to the client, and to expect, that he will perform his duties with all competence and due care. The author substantiates the greater effectiveness of the approach of establishing a presumption of conscientious fulfillment of fiduciary duties by a trustee and bringing to responsibility only if the contrary fact is proven.

Corporate Governance in Platform Governance: Reassessing Stakeholderism in a Disruptive Era

Today, many of the largest and most successful businesses such as Google, Amazon, Apple, and Metaverse (Facebook) operate as online platforms. While they bring vast economic and societal benefits, their negative impacts on the society are increasingly causing public concerns. Despite the consensus that they must be governed, a topdown style of public regulation may not represent an optimal path to address platform ills. In this context, corporate governance that incorporates a stakeholder perspective may provide a preferable means to strengthen platform governance. While stakeholder thinking is not without its criticisms, the context of the platform society and disruptive innovation does provide a strong case for stakeholderism. The latter may therefore have the potential to bridge the topics of platform governance and corporate governance. Platform governance via corporate governance may be institutionalised along multiple lines including, inter alia, stakeholder representation on the board, directors’ fiduciary duty enforceable by stakeholders, the board’s reporting obligation in respect of platform governance, and the stewardship responsibility imposed upon institutional shareholders.

Trustees’ Indemnities and Fiduciary Duties: The High Court Appeal in Naaman v Jaken Properties Australia Pty Ltd

The High Court of Australia appeal in Naaman v Jaken Properties raises the question whether a successor trustee owes a ‘fiduciary duty’ to the former trustee to not destroy, jeopardise or diminish the former trustee’s right of indemnity over trust assets. That question arises to determine whether third parties are liable to account in equity as knowing recipients of property dissipated to frustrate the former trustee’s indemnity. It is argued in the appeal that the successor trustee holds the trust assets on express trust for the former trustee to the extent of the former trustee’s indemnity. That conclusion does not account for the variety of equitable interests. Three main points emerge. First, a current trustee has a ‘beneficial interest’ in trust assets only in a superficial sense. Second, upon transfer, that ‘beneficial interest’ is not ‘retained’ by the former trustee; the entitlement of a former trustee over the trust fund changes, and becomes analogous to a charge over a fund. The language of ‘beneficial interest’ in each case is misleading and should be eschewed. Third, it is unnecessary to ask, for the purposes of Barnes v Addy liability, whether any ‘duty’ owed by a successor to a former trustee is a ‘fiduciary duty’.

Правовая защита лиц, сообщающих о фактах коррупции, и их классификация

Persons reporting corruption may play an important role in disclosing information that would otherwise go unnoticed. Such information can increase the effectiveness of the prevention, detection and investigation of corruption offenses. The article provides examples of measures to protect informants, classifying the following categories of such persons: notifiers with a corresponding fiduciary duty; informants being participants in criminal proceedings; voluntary whistleblowers in criminal proceedings; confidants; anonymous informants and persons reporting corruption at the workplace. A separate group consists of facilitators: those who help the informants in question and also have the right to protection.

Legal Challenges through the Theory of Harmony of Labor and Capital Interests

This article explores the relationship between labor and capital interests through the lens of Frederick Winslow Taylor’s scientific management theory and Georgian legal frameworks. It examines how harmonizing these interests can address organizational conflicts and enhance labor efficiency and capital growth. The concept of “interest” plays a critical role in this analysis. In a broader sense, interest reflects an individual’s motivation and engagement with various subjects, shaped by their legal, social and economic context. Interest pertains to production relationships and the distribution of resources, influencing how labor and capital interact within a corporate setting. Optimizing work processes can align employee and employer goals, fostering a more equitable distribution of wealth. The analysis highlights the role of interest in legal contexts and the importance of compliance in managing conflicts. Organizations can improve governance and achieve a balanced, productive work environment by integrating scientific management with fiduciary duties and ethical practices.

Reforming Corporate Compliance Systems in China Under the New Company Law: Lessons from The United States and Japan

This article investigates the construction of an ideal compliance system under China’s new Company Law through a comparative legal analysis. It begins by identifying the existing challenges in China’s compliance framework, particularly the historical dominance of shareholder primacy and the uneven distribution of responsibilities under the previous Company Law. These issues have hindered the development of an effective compliance system, necessitating a reevaluation of corporate governance principles in China. The comparative analysis examines the compliance systems in the United States and Japan, focusing on the frameworks and key elements such as fiduciary duties and the application of the business judgment rule. The study highlights significant differences in how these jurisdictions handle compliance, providing insights into potential improvements for China’s system. This section underscores the importance of adapting international best practices to local contexts to enhance the effectiveness of corporate compliance in China. Finally, the article proposes a dual-level compliance concept tailored to China’s unique legal and corporate environment, integrating both private and public interests. It outlines specific compliance duties for directors, supervisors, and other compliance personnel, emphasizing the need for robust information transmission, whistleblower protections, and temporary management systems. The conclusion calls for a comprehensive and flexible compliance framework that not only ensures corporate profitability but also promotes broader societal welfare, aligning with the evolving goals of corporate governance in China. Keywords: Compliance System, Corporate Governance, Fiduciary Duties, Business Judgment Rule, New Company Law

Spotting Portfolio Greenwashing in Environmental Funds

AbstractThis paper examines greenwashing practices in environmental funds. We utilize a unique data set of US equity mutual fund holdings between 2012 and 2021 to calculate the funds’ carbon footprints. Using a difference-in-differences analysis, we find that, following their commitments to sustainability, environmental funds fail to reduce their carbon footprints relative to a matched group of conventional funds. We also find, using an event study, a significant increase in the flows of environmental funds in response to these commitments. The combination of the failure to reduce carbon footprints and the surge in inflows provides evidence of greenwashing by environmental funds, raising concerns about their fiduciary duty. Our findings also show that greenwashers tend to initially have low flows and high portfolio carbon emissions suggesting that they announce their commitments to sustainability just to attract investors.

Fiduciary duty for directors and managers in the light of anti-ESG sentiment: an analysis of Delaware Law

ABSTRACT The global rise in ESG regulations, particularly in Europe, is impacting businesses worldwide. Research grows on a positive correlation between ESG and corporate performance, and 2023 constitutes a turning point marked by a backlash in the U.S. This has prompted a reassessment of sustainability strategies and raised concerns about potential conflicts with the fiduciary duties of directors and portfolio managers. This paper explores the tension between ESG and shareholder primacy under Delaware law, which is home to 66% of Fortune 500 companies. It is a contribution to the theories of shareholder primacy and corporate governance with the most up-to-date evidence, at the intersection of law, economics and finance. Although Delaware courts have not specifically approached the liability extent of directors and asset managers in ESG-related decisions, they have established the elements of the fiduciary duties of care and loyalty, which can be applied to ESG-aligned decisions. This paper highlights guidelines for directors, portfolio managers and fiduciaries when making ESG-aligned decisions, in particular the careful documentation of the process followed in reaching a decision. The paper also calls for more rigour in the field of sustainability.

Scotland in the Forefront of Property Law Reforms in the UK: Potential Implications for the Scottish People

Abstract The Scottish Government has taken steps to revolutionise its body of law on ‘trust and succession’ and housing. The recent Trusts and Succession (Scotland) Act 2024 has severally impacted the issues of appointment and removal of trustees, fiduciary duties of trustees, rights of beneficiaries, and Environmental, Social, and Governance (ESG) investments in Scotland; while the proposed new Housing (Scotland) Bill 2024 has the proclivity of influencing rent, rent control areas, eviction and homelessness in Scotland. Accordingly, this paper focuses on exploring the potential impacts of these legislative reforms on the lives of the Scottish people. Do they ‘make’ or ‘mar’ the proprietary rights of the Scottish people? Are all the provisions useful to Scotland’s rental market? Will the proposed ‘ask and act’ approach address homelessness in Scotland? This paper will also be important to jurisdictions that may intend to modernise their property law and housing regimes.

Quistclose trusts and green projects

Abstract This article analyses the relevance of Quistclose trusts in a situation in which lenders make green finance available to borrowers for environmentally sound and sustainable projects. This examination highlights how a transaction can be structured to increase the likelihood of such a trust being recognised. This article will also consider green loans (as defined by the Loan Market Association) since these loans have characteristics that can indicate the presence of a Quistclose trust. Beyond the practical aspects of creating a trust, the article explores whether a Quistclose trust can be useful when money is lent for green projects. It is possible to question if Quistclose trusts can motivate borrowers to be more conscious of how they use the loan money. In particular, the article discusses whether the fiduciary duty regarding the use of the funds can strengthen the integrity of certain loans.

Vulnerable student digital well‐being in AI‐powered educational decision support systems (AI‐EDSS) in higher education

AbstractStudents' physical and digital lives are increasingly entangled. It is difficult to separate students' digital well‐being from their offline well‐being given that artificial intelligence increasingly shapes both. Within the context of education's fiduciary and moral duty to ensure safe, appropriate and effective digital learning spaces for students, the continuing merger between artificial intelligence and learning analytics not only opens up many opportunities for more responsive teaching and learning but also raises concerns, specifically for previously disadvantaged and vulnerable students. While digital well‐being is a well‐established research focus, it is not clear how AI‐Powered Educational Decision Support Systems (AI‐EDSS) might impact on the inherent, situational and pathogenic vulnerability of students. In this conceptual paper, we map the digital well‐being of previously disadvantaged and vulnerable students in four overlapping fields, namely (1) digital well‐being research; (2) digital well‐being research in education; (3) digital well‐being research in learning analytics; and (4) digital well‐being in AI‐informed educational contexts. With this as the basis, we engage with six domains from the IEEE standard 7010–2020—IEEE Recommended Practice for Assessing the Impact of Autonomous and Intelligent Systems on Human Well‐Being and provide pointers for safeguarding and enhancing disadvantaged and vulnerable student digital well‐being in AI‐EDSS. Practitioner notesWhat is already known about this topic Digital well‐being research is a well‐established focus referring to the impact of digital engagement on human well‐being. Digital well‐being is effectively inseparable from general well‐being as it is increasingly difficult to disentangle our online and offline lives and, as such, inherently intersectional. Artificial Intelligence shows promise for enhancing human digital well‐being, but there are concerns about issues such as privacy, bias, transparency, fairness and accountability. The notion of ‘vulnerable individuals’ includes individuals who were previously disadvantaged, and those with inherent, situational and/or pathogenic vulnerabilities. While current advances in AI‐EDSS may support identification of digital wellness, proxies for digital wellness should be used with care. What this study contributes An overview of digital well‐being research with specific reference how it may impact on vulnerable students. Illustrates specific vulnerabilities in five domains from the IEEE standard 7010–2020—IEEE Recommended Practice for Assessing the Impact of Autonomous and Intelligent Systems on Human Well‐Being selected for their significance in online learning environments. Pointers for the design and implementation of fair, ethical, accountable, and transparent AI‐EDSS with specific reference to vulnerable students. Implications for practice and/or policy Fairness, equity, transparency and accountability in AI‐EDSS affect all students but may have a greater (positive or negative) impact on vulnerable students. A critically informed understanding of the nature of students' vulnerability—whether as inherent, situational and/or pathogenic, as well as temporal/permanent aspects—is crucial. Since AI‐EDSS can exacerbate existing vulnerabilities resulting in pathogenic vulnerability, care is needed when designing AI‐EDSS.

Justifications for minority co-owned groups and their corporate law implications

Abstract Corporate groups with listed subsidiaries are common around the world, despite the risks they pose to minority shareholders. Shaping a firm as a web of formally independent, minority-co-owned legal entities facilitates controllers’ diversion of corporate wealth (tunnelling) via intragroup transactions and other nontransactional techniques. This Article problematizes the conventional view of groups as tunnelling-facilitating infrastructures by arguing that organizing as a group with listed subsidiaries (a minority co-owned group) may create value for all shareholders. Organizing as a minority co-owned group may increase transparency, improve performance thanks to the possibility of using stock options for subsidiaries’ managers, allow for the circumvention of inefficient restrictions to dual-class shares, facilitate cross-border acquisitions, and be a second-best solution in the presence of path dependence issues preventing firms from moving from concentrated to dispersed ownership. If these are the economic rationales for having minority co-owned groups, how should the latter be regulated? In continental Europe special corporate law rules centred on a relaxation of directors’ fiduciary duties within minority co-owned groups, with a view to facilitating intragroup transactions, are increasingly popular among academics and policymakers. These rules, in turn, are bound to blur the separation between the minority co-owned listed entity as an independently managed firm and other members of the corporate group. However, because the rationales for minority co-owned groups presuppose the opposite, namely a clear and transparent separation between the minority co-owned listed entity and the group, our conclusion is that stringent self-dealing rules (or at least no less stringent rules than those established for conflicted transactions other than intragroup transactions) are required for minority co-owned groups to create value for all shareholders rather than merely facilitate tunnelling.

Controlling non-controlling shareholders: The case of effective control

Abstract One of the most important developments underlying capital markets in recent years is the increase in the influence of activist minority shareholders. In a company without a controlling shareholder, dominant and activist shareholders, who hold only a low proportion of the company’s shares, can influence and even tip the scales in the decisions made and direct the company’s business. The legal system therefore imposes a fiduciary duty not only on controlling shareholders but also on those with effective control. Alongside the obligation, however, the absence of a clear and explicit definition of the concepts of effective power and effective control stands out. The Article empirically analyzes key court decisions litigated under Delaware law and finds that only two explanatory variables significantly explain court decisions in cases where the question of effective control arises. It therefore proposes a test for estimating shareholders’ effective power borrowed from the field of cooperative game theory. The test is based on the Shapley Value and Shapley and Shubik’s Power Index. The Article presents its application to decisions made at shareholders’ meetings to estimate the effective power of activist minority shareholders in various decisions. This test is simple to operate, objectively examines the situation based on the factual system that existed at the time the decision was made, and is not limited to specific ownership structures, particular markets, or current times. Adoption of the test is expected to increase the legal certainty regarding the imposition of duties on activist minority shareholders with effective control, thereby reducing the agency costs created as a result of the gap between their formal share in the corporation and their effective power.

Investors’ willingness to use robo-advisors: Extrapolating influencing factors based on the fiduciary duty of investment advisors

Robo-advisors are increasingly seen as a solution for the growing demand for timely and actionable financial advice. However, systematic barriers to their deployment and use persist. Understanding the factors that influence investors' willingness to consult with robo-advisors is key to their wide-scale adoption. This research aims to isolate the factors influencing the willingness to adopt robo-advisors by investment advisory services. We focus on three adoption drivers: (1) performance of robo-advisors, (2) human-computer interaction, and (3) the reputation of software suppliers. Results indicate that ‘performance efficacy’, ‘perceived ease of use’, ‘customer education’, and ‘corporate reputation’ positively influence the perceived value, leading to higher adoption intention. Additionally, ‘performance efficacy’, ‘perceived privacy protection’ and ‘corporate reputation’ positively contributes to the building of trust, which in turn leads to higher adoption intention and asset allocation ratio. We found that low-experience investors were “value-driven”, while highly experienced investors were “trust-driven” when it came to adoption intent. The research highlights the potential of artificial intelligence-based applications for user behavior research and suggests design considerations for robo-advisor developers to influence positive adoption in financial advisory services.

Toward the European Health Data Space: The IMPaCT-Data secure infrastructure for EHR-based precision medicine research

Background:Art. 50 of the proposal for a Regulation on the European Health Data Space (EHDS) states that “health data access bodies shall provide access to electronic health data only through a secure processing environment, with technical and organizational measures and security and interoperability requirements”. Objective:To identify specific security measures that nodes participating in health data spaces shall implement based on the results of the IMPaCT-Data project, whose goal is to facilitate the exchange of electronic health records (EHR) between public entities based in Spain and the secondary use of this information for precision medicine research in compliance with the General Data Protection Regulation (GDPR). Data and methods:This article presents an analysis of 24 out of a list of 72 security measures identified in the Spanish National Security Scheme (ENS) and adopted by members of the federated data infrastructure developed during the IMPaCT-Data project. Results:The IMPaCT-Data case helps clarify roles and responsibilities of entities willing to participate in the EHDS by reconciling technical system notions with the legal terminology. Most relevant security measures for Data Space Gatekeepers, Enablers and Prosumers are identified and explained. Conclusion:The EHDS can only be viable as long as the fiduciary duty of care of public health authorities is preserved; this implies that the secondary use of personal data shall contribute to the public interest and/or to protect the vital interests of the data subjects. This condition can only be met if all nodes participating in a health data space adopt the appropriate organizational and technical security measures necessary to fulfill their role.

Artificial Intelligence Intervention in Corporate Governance: Directors’ Fiduciary Duties

Artificial Intelligence Intervention in Corporate Governance: Directors’ Fiduciary Duties

International Migration and Migration Policy Reforms

The article examines the problems of regulating illegal migration by developed countries and the European Union, the achievements that cause not always correct criticism, and the possibilities of using the experience of a number of countries and new approaches in this regulation are shown. Particular attention is paid to international organizations dealing with the problems of international migration. It was concluded that there is no clear division of their functions by type of migration, which prevents the formation of long-term policies. Proposals were formulated to strengthen the role of the International Labour Organization (ILO) in rule-making and norm-setting on labor migration, which plays an increasingly important role in sustainable development. It was concluded that it is necessary to change the status of the migration conventions, otherwise effective regulation of labor migration is impossible. The countries of the Persian Gulf that attract external labor immigrants despite the rapid growth of the local population are highlighted. The difference in countries’ policies towards labor migration in the 21st century compared to the 20th century is shown. The concept of “fiduciary duty” of federal governments in relation to external migration was introduced.

The Business Judgment Rule as a Protective Armor for Directors’ Responsibilities: A Comparative Study Among Mauritius, United Kingdom, and United States

Abstract The business judgment rule (BJR) is a corporate law doctrine that protects a decision of directors from fairness review by a court of law unless there is sufficient evidence that the director has breached his fiduciary duties or that the decision-making process is tainted. Given that the BJR acts as a protective armor for directors as their personal liability is not engaged for a corporate decision irrespective of its outcomes provided that some requirements are satisfied, the purpose of this paper is to critically assess whether directors of Mauritian companies are sufficiently protected and encouraged in the exercise of their duties. To achieve the research objective, the black letter research method was adopted to collect secondary data and a comparative analysis with some other countries’ rules on business judgment was conducted. A desk-based approach and content analysis were used to collect this information. The countries selected for the comparison are the United Kingdom and United States. Mauritian law does not afford protection to directors for decisions taken based on business judgment whereas this research has demonstrated that the laws of other countries being the United Kingdom and the United States as well as their judicial instances both recognize and apply the BJR.