Case 10. A Dishonest Broker

Titius, a Catholic, became an agent for buying and selling shares in the public market (stock-exchange broker). When business did not succeed as he had hoped, he tried in various ways to increase his fortune. Having received an order to buy specified shares at the current price, since the price varied during the day, he reported the highest price to the client and retained for himself the difference between this and the true price at which he had bought the shares. When the price of certain shares had fallen, he bought them in a large quantity in his own name and afterward, when the price had risen, frequently sold them to clients at a great profit. In order that this business might succeed more surely, he placed articles in newspapers in which he praised more than was right the security and value of those shares in order to attract buyers. By these devices the affairs of Titius were in a better state; but, driven by scruples of conscience, he came to confession, and, since without doubt he had inflicted great losses upon many persons known and unknown, disclosed his manner of acting to the confessor. Hence it is asked:

1. What are the obligations of an agent?

2. To whom and by what law is restitution to be made when the creditor is uncertain?

3. What is to be said of the case?

1. What are an agent's obligations?

“In default of express or implied agreements to the contrary, the duties of an agent implied by law are: to perform the contract of agency; to observe the limits of his authority and the instructions given him by the principal, as also the customs and usages of the business in which he is employed; in all things left to his discretion to act with the most perfect good faith in the interest and for the benefit of his principal; to exercise due skill, care, and diligence, according to the nature of the business entrusted to him and the terms of the agency; to keep the money and property of his principal separate from his own; to pay over to the principal all moneys received to his use, and to account to him for all secret profits and commissions. No agent is allowed to enter into any transactions in which he has a personal interest at variance with his duty to his principal or from which he obtains any personal benefit or profit except with the consent of the principal.”¹

1 Manual of Moral Theology, vol. i, p. 545.

2. This question is answered above, p. 273.²

2 Compare the same work, p. 424.

3. The case. Titius, a stock-broker, on getting an order to buy a certain stock at the current rate, debited the highest price that ruled on the day in question to his client and pocketed the difference. In doing this he clearly committed an act of injustice, since he was bound to act for his principal, not for himself. He must restore his ill-gotten gains.

In buying stock on his own account when the price sank and selling afterward to his clients at a profit when the price rose, he acted within his rights, provided that he always sold at the current price. But when he unduly puffed such stock in the press in order to attract buyers and raise its price, and thereby caused loss to many, both known and unknown, he acted unjustly, and for this he is bound to make restitution. For to hold oneself out as an expert and then give damaging advice to clients for one’s own benefit is fraudulent and unjust. If Titius can not succeed on the stock exchange by honest means, he should try some other occupation.