Compliance Solutions for Investment Advisers

Conflicts of Interest in Investment Allocation

Conflicts of interest in allocating investment opportunities among your advisory clients can arise in a multitude of situations, including:

  1. Accounts subject to performance fees versus those that do not pay performance fees;
  2. Accounts that pay a higher investment management fee versus those that pay lower management fees;
  3. Accounts that have a strategic relationship with your advisory firm versus an account that is not significant to your firm’s strength;
  4. Accounts that refer potential business to your advisory firm versus those that do not make such referrals; and
  5. Proprietary accounts versus non-proprietary accounts.

The term “versus” is usually reserved for sporting events or other competitions, but that is exactly what you have here – competing interests between two types of accounts. Favoring one type of account may directly benefit your firm, hence the conflict.

 

 

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