CMFAS RES5 Ethics Foundations question: types of misalignment of interest

CMFAS RES5Ethics Foundations

A bank reserves an attractive, higher-yielding investment opportunity for its high-net-worth clients while offering its retail clients — to whom it owes the same obligations — only inferior products. In the study text's five types of misalignment of interest, this is a conflict between:

A A representative and a single client whose interests differ from his own
B A representative and one of several clients within a family, such as a husband and wife
C The financial institution and its representatives, over how sales targets are set
D The institution and its clients, favouring some clients over others it owes the same duty

Show the answer and explanation

Answer: D. The institution and its clients, favouring some clients over others it owes the same duty

The text's fifth type of misalignment is between the financial institution and one or more clients — its example being an institution that creates an attractive investment opportunity for high-net-worth clients at the expense of other (retail) clients to whom it has the same obligations.

Common mistake

The conflict here is at the institution-versus-clients level (favouring some clients over others), not a representative-level or institution-versus-representative conflict.

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Original study material mapped to the public CMFAS RES5 syllabus. Unofficial, not endorsed by MAS or SCI. Verify figures and rules against current guidance before relying on them.