CMFAS RES 2B Ethics, Codes & Standards for Derivatives Dealing question: conflicts of interest

CMFAS RES 2BEthics, Codes & Standards for Derivatives Dealing

Which statements about conflicts of interest are CORRECT? (a) A representative must avoid, or make full and fair disclosure of, all matters that could reasonably be expected to impair his independence and objectivity. (b) Such disclosures must be prominent, delivered in plain language and communicated effectively. (c) Once the client consents to the transaction with knowledge of the conflict, the representative's duty in respect of that conflict is discharged. (d) Transactions for clients and employers take priority over transactions in which the representative is the beneficial owner.

A (a), (b) and (d) only
B (a) and (c) only
C (b), (c) and (d) only
D (a), (b), (c) and (d)

Show the answer and explanation

Answer: A. (a), (b) and (d) only

RES 2B 5.4.1.6 requires avoidance or full and fair disclosure in prominent plain language, and gives priority of transactions to clients and employers over the representative's own beneficial interests. It also states that even where the client consents with knowledge of the conflict, the representative must still actively seek alternative solutions to avoid the conflict.

Common mistake

Consent is not absolution. The duty to look for a way round the conflict survives the client saying yes.

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