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Conflicts of Interest Code of Conduct
An FSP runs a competition where representatives who sell the most of a single insurer's product win an overseas trip. Why is this a concern under the conflict-of-interest rules?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) It is an incentive that could bias advice towards one product supplier rather than what best suits each client.Correct
- b) It is acceptable because incentives always improve customer outcomes.
- c) It is only a concern if the trip is worth more than the client’s premium.
- d) It is irrelevant because representatives never influence product choice.
Why this is the answer
A supplier-specific sales incentive can steer representatives to recommend that supplier's product over a more suitable alternative, creating a conflict between the representative's interest (winning the prize) and the client's interest. Such incentives must be avoided or carefully managed and disclosed.
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