California is a heavily regulated state. There are over 200 agencies regulating everything from job licensure requirements and clean air standards to recycling requirements and political practices. A significant amount of these agencies deal with financial transparency and fairness. Such agencies are often responsible for upholding strict standards for financial professionals, investigating fraud and various types of white collar crime, and protecting consumers from financial professionals that breach their professional duties.
While many criminal investigations involve cooperation from multiple agencies, the agencies listed below take a proactive role in the investigation of fraud, embezzlement, and other financial crimes. They include:
In addition to the agencies described in brief above, it’s important to spend some time looking at the Professional Fiduciaries Bureau and Department of Financial Protection and Innovation (DFPI). This agency is part of the California Department of Consumer Affairs, and it oversees anyone who has a fiduciary duty to their clients. A fiduciary duty is an individual’s legal obligation to do what is in a person’s best interest. When someone fails to uphold their fiduciary duty and causes a client financial loss, this can trigger an investigation.
A big part of the Professional Fiduciaries Bureau involves protecting those who are vulnerable to exploitation. Professional fiduciaries may manage the financial affairs of seniors, people with disabilities, and children. Those in these categories are especially vulnerable, and professional fiduciaries who violate their duty are often quite literally taking food out of their clients’ mouths.
The Department of Financial Protection and Innovation regulates many businesses that handle financial transactions. Financial professionals, services, and products all fall within their jurisdiction. They include:
This agency is generally responsible for holding investment advisers responsible when they violate their fiduciary duty. Any advisor registered with the U.S. Securities and Exchange Commission is a fiduciary and, as a result, must act in their client’s best financial interest.
When a fiduciary violates their duty and their client can prove that they suffered financial losses as a result, the advisor may face stiff legal consequences. There are numerous ways a fiduciary may act against their client’s best interest—they may refer them to investments or services for which the advisor receives a kickback, even though those services are not best for the client. They may invest a client’s money in funds that are likely to cause them to lose money. It’s also a breach of duty if an advisor recommends a risky investment without fully informing the client of the risks.
If a fiduciary is accused of violating their duty, it is crucial to take immediate action. Even if the claims are unfounded, they risk losing their reputation and career simply because of these accusations. Being proactive about your defense after an accusation is one of the safest ways to protect your career and your future.
Patrick Delahunty is a former federal prosecutor with deep experience in resolving disputes. He advises individuals and companies in complex criminal, regulatory, and commercial litigation.