Guidance on Conflicts of Interest for Investment Advisers

January-February 2015Articles Practical Compliance & Risk Management for the Securities Industry

Introduction

Conflicts of interest arise in any fiduciary relationship and perhaps no more so than in the financial services industry. In October 2013, FINRA released a report on the conflicts of interest in the retail broker-dealer contracts. The report focused on identifying and managing conflicts in a firm’s three critical areas: (1) enterprise level frameworks to identify and manage conflicts; (2) approaches to handling conflicts of interest; and (3) compensation for associated persons. The report provides retail broker-dealers with summaries of how the industry manages and mitigates conflicts of interest. While FINRA has no authority over investment advisers, the conflicts that arise in retail broker-dealer context are substantially similar to the conflicts that arise for investment advisers.

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