prudent-man rule investment & finance definition
A
legal securities standard that asks the question “What would a prudent man do?”
in order to determine whether an action was reasonable or whether it violated
fiduciary duties. The legal standard originated in 1830 when Judge Samuel
Putnum wrote, “Those with responsibility to invest money for others should act
with prudence, discretion, intelligence and regard for the safety of capital as
well as income.”
See prudent-man rule in Wall Street Words
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.
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