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Conflicts of Interest Code of Conduct
Under the General Code, how must an FSP deal with a conflict of interest between itself (or a representative) and a client?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) Avoid it where possible, and where it cannot be avoided, disclose it to the client and manage it under a conflict-of-interest management policy.Correct
- b) Ignore it, since clients are assumed to expect that providers act in their own interest.
- c) Disclose it only if the client specifically asks whether a conflict exists.
- d) Resolve it by always choosing whichever option pays the representative the most.
Why this is the answer
The Code requires FSPs to avoid conflicts of interest where possible and, where they cannot be avoided, to disclose them to the client and mitigate them in terms of a documented conflict-of-interest management policy. Acting in the representative's own financial interest over the client's is exactly what must be controlled.
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