prudent man rule

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Prudent Man Rule

A legal rule requiring investment advisers to only make investments for their clients' discretionary accounts that a "prudent person" would make. This means that investment advisers operating discretionary accounts are not allowed to make investments they believe will lose money for the client. It does not require that the investment adviser always make correct decisions; it merely requires him/her to make decisions that will be generally accepted as sound for someone of average intelligence. The rule has its origins in an 1830 court decision in Massachusetts, stating that trustees must manage the affairs of others as if they were managing "their own affairs." See also: Suitability rules, Twisting.

prudent man rule

A federal and state regulation requiring trustees and portfolio managers to make financial decisions in the manner of a prudent man, that is, with intelligence and discretion. The prudent man rule requires care in the selection of investments but does not limit investment alternatives. See also investment-grade, legal list.

Prudent man rule.

The prudent man rule is the basic standard a fiduciary, who is responsible for other people's money, must meet.

It mandates acting as a thoughtful and careful person would, given a particular set of circumstances. A trustee, for example, observes the prudent man rule by preserving a trust's assets for its beneficiaries.

The prudent man rule has sometimes been described as a defensive approach to money management, putting greater emphasis on preservation than on growth. The newer prudent investor rule differs by putting greater emphasis on achieving a reasonable rate of return and by delegating decision-making to investment professionals.

References in periodicals archive ?
The American rule renders an interim fair allocation of the claim except when a trial results.
significantly revised the boundaries of the American rule and makes an
11) The American rule of leaving the parties to bear their own costs encourages contestants who, like the Johnson children, are pursuing a farfetched claim.
The teenager said even American rule would be preferable to that imposed by Saddam.
But no, intrasigence on the part of the Argentine junta and steely resolve by Margaret Thatcher and her Government ensured that thousands of our finest young men saw action, and hundreds of them died fighting to free this remote British outpost from unwanted South American rule.
Bush get away with the replacement of the American rule of law with military kangaroo courts.
Under the terms of the December 1898 treaty ending the Spanish-American War, the United States gained possession of the Philippine Islands, a distant archipelago whose inhabitants had for years been struggling to gain independence from Spain and who were now equally determined to prevent American rule of the islands.
Judicial exceptions to the American rule involve the assessment of attorneys' fees as sanctions for procedural misconduct and legislative exceptions incorporate attorneys' fees into the remedies provided for violations of certain substantive rights.
For example, Slawson includes thought-provoking analyses of the theory of punitive damages (which he would limit) and the American rule of allowing the successful party to recover litigation costs (which he would abolish in most contract cases).
Owen, Compadre Colonialism: Studies in the Philippines under American Rule (Ermita, 1973); Stuart Creighton Miller, "Compadre Colonialism," The Wilson Quarterly 10 (1986): 92-105.
Few critics of loser-pays really hew to the so-called American Rule.
The last book is about the struggle against Saddam Hussein and the disappointing American rule that followed.

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