Agency

In the context of finance and law, agency refers to a fiduciary relationship in which one party — the agent — is authorised to act on behalf of another party — the principal — in transactions with third parties. The agent's actions within the scope of their authority legally bind the principal. In financial markets, agency relationships are pervasive: stockbrokers act as agents for investors, investment advisors act as agents for clients, and company directors act as agents for shareholders. The agency relationship creates specific duties — including the duty of loyalty, care, and disclosure — that the agent owes to the principal. In economics, the 'principal-agent problem' arises when the interests of the agent diverge from those of the principal, a concept central to corporate governance analysis. For investors on Ventura Securities, understanding agency relationships is foundational to evaluating corporate governance quality, management incentive alignment, and the legal accountability of financial intermediaries.