Brokerage firms, financial advisors and financial institutions in New York are involved in many different activities that could potentially give rise to a conflict of interest.
The FINRA has many rules that are intended to reduce the potential for conflicts of interest. FINRA rules require that brokerage firms conduct thorough conflict-of-interest checks and disclose any potential conflicts of interest to their customers.
Financial advisors and institutions must disclose all material information to investors so they can make fully informed financial or investment decisions. Some rules forbid certain practices altogether.
Examples of a conflict of interest among financial advisors include recommending products solely because they will generate more revenue or inducing investors to make investments that will produce the highest commissions.
Financial institutions that ask their advisors to recommend certain products in exchange for greater compensation are engaging in unethical behavior that is considered a conflict of interest.
Brokerage firms must perform activities that do not conflict with each other. For example, a brokerage firm cannot act as both an advisor and a lender or sell products that they or one of their affiliates underwrite.
A conflict of interest is not only unethical, but it is also a breach of fiduciary duty. The goal of the FINRA rules related to conflicts of interest is to prevent financial harm to investors.
Preventing conflicts of interest
Although FINRA regularly conducts assessments and monitors the financial industry to prevent conflicts of interest from happening, the rules regarding conflicts of interest can be tricky. It is sometimes a gray area of the law.
You may find yourself being a victim of a conflict of interest and suffering serious financial losses. However, you have legal rights and options available if you are in this situation. Getting proper advice and guidance are essential.