Financial advisors owe fiduciary duties to clients with whom they have a relationship of trust and confidence. Calhoun County v. Blue Cross Blue Shield Michigan, 297 Mich. App. 1; 824 N.W.2d 202 (2012) (addressing agent-principal relationship generally); Hamameh v. Gilson, 2014 WL 6679261 (Mich. App. 2014) (addressing financial advisor-client relationship specifically); Kleer v. Tactical Allocation Group, LLC, 2011 WL 4375237, at *2 (Mich. App. 2011).
As fiduciaries, financial advisors have a duty to fully and fairly disclose all of the material facts and circumstances surrounding a transaction that they recommend. Lumber Village, Inc. v. Siegler, 135 Mich. App. 685; 355 N.W.2d 654 (1984); Barrett v. Breault, 275 Mich. 482; 267 N.W. 544 (1936) (“there is an affirmative duty to disclose where the parties are in a fiduciary relationship.”); In re Estate of Zsenyuk, 2006 WL 1329149 (Mich. App. 2006) (“a fiduciary duty between the parties creates an affirmative duty to disclose”).
In light of the duty of disclosure owed by fiduciaries, it is well established that “[a] release obtained by a fiduciary through concealment or misrepresentation is of no effect.” Masterson v. Pergament, 203 F.2d 315, 322 (6th Cir. 1953); Mazak Corp. v. King, 496 F. App’x 507, 511 (6th Cir. 2012) (“The vast majority of state and federal courts have held that a release must be set aside if the fiduciary failed to make a full disclosure of all relevant facts to the beneficiary.”) (citing 1 Restatement (Second), Contracts § 173); see also, Street v. J.C. Bradford & Co., 886 F.2d 1472, 1481-82 (6th Cir. 1989) (securities purchaser’s release of his broker might be ineffective if the parties were not on equal footing).
A fiduciary’s failure to satisfy the duty of disclosure can also give rise to liability for breach of fiduciary duty and fraud. See, e.g., Grigg v. Hanna, 283 Mich. 443, 459; 278 N.W. 125 (1938) (“The failure on the part of one occupying a fiduciary relation to fully and fairly disclose all of the facts to those to whom such duty of disclosure is owed may be regarded as evidence of fraud.”).
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