Finserv Glossary

Conflict of Interest Disclosures

What are Conflict of Interest Disclosures?

Valuable information on conflict of disclosures is available for persons involved in the highly-regulated financial services industry through the agencies like the Financial Industry Regulatory Authority (FINRA) www.finra.org. As noted on its website, it is authorized by Congress to protect America’s investors by making sure the broker-dealer industry operates fairly and honestly. It oversees more than 624,000 brokers across the country—and analyzes billions of daily market events.

As such, FINRA is dedicated to protecting investors and safeguarding market integrity in a manner that facilitates vibrant capital markets. FINRA uses innovative AI and machine learning technologies to keep a close eye on the market and provide essential support to investors, regulators, policymakers and other stakeholders.

Conflicts of interest can arise in any relationship where a duty of care or trust exists between two or more parties, and, as a result, are widespread across the financial services industry. While the existence of a conflict does not, per se, imply that harm to one party’s interests will occur, the history of finance is replete with examples of situations where financial institutions did not manage conflicts of interest fairly. Indeed, many of the foundational pieces of legislation governing financial services in the United States contain provisions crafted precisely to address conflict situations.

FINRA published a Conflict of Interest Report in July 2012—as an outgrowth of its mission to protect investors and consequent longstanding attention to conflicts issues—FINRA initiated a review at a number of large firms to better understand how they manage conflicts of interest and to identify effective practices to manage those conflicts. According to then FINRA Chairman and CEO Richard G. Ketchum, the report was published “to share those practices and help firms of all sizes strengthen their own conflicts frameworks. Of course, there is no one-size-fits-all approach, but FINRA believes an effective conflicts management framework should address the following considerations.”

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