Defined Terms and Documents       

Principal-Agent Relationship means:

  • Inherent in the Principal-Agent Relationship is the understanding that the Agent will act for and on behalf of the Principal (which may be more than one entity, person or company).

  • The Agent assumes an obligation of loyalty to the Principal that the Agent will neither intentionally, nor negligently, act improperly. 

  • An Agent cannot take personal advantage of the business opportunities the agency position uncovers.

  • A Principal, in turn, reposes trust and confidence in its/their Agent.

  • These obligations bring forth a fiduciary relationship of trust and confidence between the Principal and the Agent.

  • An Agent must obey reasonable instructions given by the Principal.

  • The Agent must not do acts that have not been expressly or impliedly authorized by the Principal.

  • The Agent must use reasonable care and skill in performing its duties.

  • The Agent must be loyal to the Principal/s.

  • The Agent must refrain from putting itself in a position that would ordinarily encourage a conflict between the Agent’s own interests and those of the Principal/s.

  • The Agent must keep the Principal/s informed as to all facts that materially affect the Principal-Agent Relationship.

See:

Principal and agent problems in Australian responsible entities

"The introduction of the Single Responsible Entity ("SRE") into the Managed Investment Act 1998 ("MIA") was designed to improve investor protection from the shortcomings of the less regulated prescribed interest regime. This paper argues that the structure and perceived merits of the SRE is fundamentally flawed on the grounds that the principal–agent problem in the Managed Investment Scheme ("MIS") does not improve investor protection. While the efficient legal structure and benefits of the SRE were evident during the design and drafting of legislation, the true costs borne by investors were not clearly recognised until the recent investment market downturn.
In light of the inherent weaknesses in the current structure of Responsible Entity legislation via the MIA, several minor and major policy recommendations have been proposed to improve investor protection by reducing principal–agent conflicts within investment structures.
Policymakers must ensure that legislative reform is carefully drafted in order to address the principal–agent conflicts in the MIA without creating new negative effects or distortions in other areas of MIS legislation."