A conflict of interest must be disclosed to the client, in writing
A worked RES examination question on conflict disclosure, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
Halfway through marketing a unit, a salesperson realises that her own brother is the salesperson acting for the interested buyer, so that her loyalties may be pulled two ways. She is minded to press on and mention it only if someone later objects, but decides to check what the manual actually requires of her first. A salesperson realises that a potential conflict of interest exists in a transaction she is handling, and wants to be sure she deals with it in the way the PSM requires before she goes any further, rather than pressing on and sorting it out later if a client happens to object.
Consider the following statements.
- (i) She must disclose the conflict to her client.
- (ii) She must make the disclosure in writing.
- (iii) She must make the disclosure in advance, before proceeding.
- (iv) She must obtain the approval of CEA before continuing to act.
The answer, and why
Answer: C
The rule. A conflict of interest must be disclosed to the client, in writing, and in advance (before proceeding). What is then needed to continue is the *client's* informed consent — not CEA's approval.
Why C is correct. (i), (ii) and (iii) — to the client, in writing, in advance — are all required. (iv) is false: the client's consent lets her continue, not any approval from CEA.
The other options.
- A drops the writing requirement at (ii).
- B adds the false (iv), CEA approval.
- D drops the advance-timing requirement at (iii).
Exam note. It is the *client's* consent that lets you proceed, never CEA's approval. Watch for "obtain CEA approval" slipped into the fourth limb.
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