The diversity of status-set and role-set relationships of the stockbroker generates various fiduciary and other role-relationship problems. A socio-legal analysis is presented of three mechanisms for resolving the status-set and role-set conflicts of the stockbroker: segregation of statuses, the proliferation of regulatory and self-regulatory structures, and the professionalization of the stockbroker. The analysis suggests some implications for role theory, for the study of interorganizational relations, and for problems of social control through law. T he securities industry may be viewed as a social system with a complex structure of interacting roles, a complex network of interacting organizations, and a complex system of legal norms derived from common law, statutory law, administrative regulations, and private legal systems.1 It exemplifies what Riesman refers to as the factual impenetrability of the law.2 The complexity of this industry is documented in a recently-completed voluminous study entitled, Report of Special Study of Securities Markets of the Securities and Exchange Cotmmission3 -hereinafter referred to as the Special Sttudy-which provides a wealth of data for sociological analysis. The purpose of this paper is to (a) explore some of the structural sources of fiduciary and other role relationship problems of the stockbroker; (b) analyze alternative mechanisms for handling these problems; and (c) consider some implications of our analysis for role theory, for research on interorganizational relations, and for problems of social control. THE CONCEPT OF THE FIDUCIARY RELATIONSHIP IN LAW AND SOCIOLOGY The concept of a fiduciary relationship is common to both law and sociology and involves, basically, duties of loyalty and of trust. One who holds a position of trust, i.e., whose function it is to act for the benefit of another as to matters relevant to the relation between them, is deemed in law to be a fiduciary; as such, he is held to the highest standards of conduct-standards which are essentially different from the less demanding obligations imposed upon parties to a transaction which is negotiated at arm's length, e.g., a buyer-seller relationship.4 The transactions and statuses whiclh give rise to the legal imposition of fiduciary standards are many and varied and may involve such diverse obligations as the employee who is prohibited from disclosing trade * Revised version of a paper read at the annual meeting of the American Sociological Association at Los Angeles, California, August 1963. I William M. Evan, Public and Private Legal Systems, in William M. Evan (ed.), and (New York: The Free Press of Glencoe, 1962), pp. 165-184. 2 David Riesman, Law and Sociology: Recruitment, Training, and Colleagueship, in Evan, op. cit., p. 14. 3Report of Special Study of Securities Markets of the Securities and Exchange Commission, H.R. Doc. No. 95, 88th Congress, 1st Session, Pts. 1-5 (Washington, D.C.: Government Printing Office, 1963). (In subsequent references to this study, we shall use the abbreviation Special Study.) 4 The fiduciary responsibility . . is a legal concept containing the implicit principle that where power is exercised under the color of benefit to another, then the one who holds power must comport himself in ways consistent with the fiduciary basis of his authority. A fiduciary cannot treat his beneficiary as if he were merely his obligee in a contractual arrangement. He owes duties of loyalty and good faith appropriate to the status assumed. Philip Selznick, Sociology and Natural Law, Natural Forum, 6 (1961), p. 104. This content downloaded from 157.55.39.104 on Sun, 19 Jun 2016 06:20:32 UTC All use subject to http://about.jstor.org/terms
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Open Access
Jan 1, 1973
Richard A Posner 
