Fiduciary duty important for accountants in SMSF dealings: solicitor
Lawyers and accountants must be aware of their fiduciary duty when dealing with clients with SMSFs, says a leading specialist solicitor.
Bryce Figot, special counsel for DBA Lawyers, said in a recent webinar that both solicitors and accountants need to consider their professional conduct obligations when providing advice for SMSFs.
“There are rules making it difficult for a solicitor, or accountant, to act for more than one client in a matter and in the area of SMSF, the funds usually have more than one member, so problems can arise,” Mr Figot said.
A fiduciary duty is an obligation that one party has to act in the best interests of another party rather than their own. The party who owes the duty is known as the fiduciary.
Fiduciary duties often arise in commercial and corporate law matters when one party has a position of trust and confidence concerning the other party.
Some examples of a fiduciary relationship include a lawyer and client, a company and the company director, and a trustee and beneficiary. However, these are not closed classes. Sometimes, for example, an accountant can be in a fiduciary relationship with their client.
Mr Figot said SMSFs usually comprise a husband and wife, although that is not necessarily the case in all instances.
“If you try and act for everyone, there may well be a conflict and it’s important to consider how you are going to deal with that. It’s something that we all need to watch out for,” he said.
“And it's not just solicitors. Accountants and other financial planners often don't think about fiduciary duties although they are important in their practice if they want to avoid litigation.”
Mr Figot said there have been several legal cases in which fiduciary duties involving financial advisers and accountants have been raised including Cameron v McMahon & Anor (No 2) [2009] VSC 412.
In this case, the plaintiff engaged an accountant to advise on investment opportunities. The defendant accountant allegedly made representations to the plaintiff about financing the business and prepared inadequate loan documents for the business. The accountant was found liable with the judge focussing his ruling on the trust the plaintiff had in the defendant.
“Lawyers should be familiar with fiduciary duties and conflict but often accountants are less familiar with these,” Mr Figot said.
“However, think about what you would do in a conflict situation as an accountant or financial adviser if the husband in the SMSF asked you to invest in one thing, or put money somewhere, and asked you not to tell his wife, the other member of the SMSF? Or vice versa? The buck ultimately stops with the accountant who is the one who will be held responsible if litigation arises.”
