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The conduct of a trustee, an attorney, or other fiduciary that consists of taking advantage of his or her position in a transaction and acting for his or her own interests rather than for the interests of the beneficiaries of the trust or the interests of his or her clients.

Self-dealing is wrongful conduct by a fiduciary. A fiduciary is a person who has duties of Good Faith, trust, special confidence, and candor toward another person. Examples of fiduciary relationships include attorneys and their clients, doctors and their patients, investment bankers and their clients, trustees and trust beneficiaries, and corporate directors and stockholders. Fiduciaries have expert knowledge and skill, and they are paid to apply that knowledge and skill for the benefit of another party. Under the law, a fiduciary relationship imposes certain duties on fiduciaries because a fiduciary is in a special position of control over an important aspect of another person's life.

One important duty of a fiduciary is to act in the best interests of the benefited party. When a fiduciary engages in self-dealing, she breaches this duty by acting in her own interests instead of the interests of the represented party. For example, self-dealing occurs when a trustee uses money from the trust account to make a loan to a business in which he has a substantial personal interest. A fiduciary may make such a transaction with the prior permission of the trust beneficiary, but if the trustee does not obtain permission, the beneficiary can void the transaction and sue the fiduciary for any monetary losses that result.

The laws pertaining to self-dealing are found mainly in case law, judicial opinions, and some statutes. Case law authorizes the recovery of monetary damages from the self-dealing fiduciary.

One of the most notable statutes relating to self-dealing is 26 U.S.C.A. § 4941 (1969), which allows the Internal Revenue Service to impose a five percent excise tax on each act of self-dealing by a disqualified person with a private, nonprofit foundation. Disqualified persons include substantial contributors to the foundation, foundation managers, owners of more than 20 percent of the foundation's interest, and members of the family of disqualified persons. If the self-dealing act is not timely corrected, the IRS may impose on the self-dealer an additional 200 percent excise tax on the amount of the transaction.

Further readings

Volkmer, Ronald R. 1992. "Breach of Fiduicary Duty for Self-Dealing." Estate Planning 19 (September–October).


Attorney Misconduct.


n. in the stock market, using secret "inside" information gained by being an official of a corporation (or from such an officer) to buy or sell stock (or real property wanted by the corporation) before the information becomes public (like a merger, poor profit report, striking oil). Self-dealing can also apply to general partners of a limited partnership who do not inform limited partners of business opportunities which should belong to the partnership. Self-dealing can result in a lawsuit for fraud by shareholders. Self-dealing with securities is a crime under the Federal Securities Exchange Act.

References in periodicals archive ?
It was accused of self-dealing, defrauding investors and attempting to cover-up investor losses.
Federal regulators ousted Stuart as chairman, president and CEO of One Bank in September 2012, a precursor to a federal investigation into his alleged self-dealing and mismanagement of the bank.
This item details some charitable giving options for owners of closely held businesses, the applicable unrelated business income and self-dealing rules, and best practices for taxpayers who have these charitable desires and restrictions.
Robbins Arroyo Investigates Claims of Self-Dealing by PMT's Chairman and CEO
The lawsuit also accuses the elder Redstone of favoritism and self-dealing, and wants the company to be dissolved and the proceeds distributed to the shareholders.
This third line of thought suggests that even if the transfers are expressly authorized in the DPOA, because of the self-dealing aspect of such transfers, the transfers must also be freely consented to by the principal at the time of the transfer or ratified thereafter.
The issue then becomes when is a self-dealing transaction "fair" to the corporation?
Federal officials alleged that the two were self-dealing by using their positions, as well as USAID-funded resources, to advance their own personal business interests and investments and those of their wives and friends.
Preventing prohibited transactions, including self-dealing and top-heavy contributions;
Smolinski, without admitting to any allegations, consented to the issuance of the order based on his alleged participation in violations of law and unsafe or unsound practices regarding identity theft, falsification of bank records, misapplication of bank funds, self-dealing, and violations of institutional internal controls that resulted in losses and other damage to the bank and personal gain to Mr.
Thus, without a proper filing of a notice of lending, the bank, as a trustee, would be "guilty" of self-dealing since it was both a trustee as a recipient of funds and a trust fund beneficiary as an entity with a claim against the trust funds for repayment of its loan.