Canadian Securities Course (CSC) Level 1 Practice Exam

How are conflicts of interest supposed to be addressed?

1. Ignore conflicts

2. Discuss conflicts publicly

3. Avoid, disclose, or control conflicts

4. Escalate conflicts to a higher authority

The correct answer is: Avoid, disclose, or control conflicts

The approach to handling conflicts of interest typically involves avoiding, disclosing, or controlling them to ensure that decision-making remains impartial and in the best interest of clients and stakeholders. In the context of financial services, professionals are obligated to manage conflicts transparently to uphold their duty of care and maintain trust with their clients. Avoiding conflicts entirely is ideal, but when that is not feasible, disclosing the conflict allows all parties involved to be aware of the potential bias and make informed decisions. Controlling conflicts through measures such as implementing procedures or policies can help mitigate the impact of the conflicts on client interests and operational integrity. While considering this, ignoring conflicts entirely could lead to unethical practices and a breakdown of trust. Discussing conflicts publicly may not always be practical or appropriate given the confidential nature of many client relationships. Escalating conflicts to a higher authority may be necessary in certain situations but is generally part of a broader strategy of addressing them rather than a standalone solution. Overall, the most effective and comprehensive means of addressing conflicts involves a combination of avoidance, disclosure, and control.