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Laurence J. Peter

Investment Dictionary

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Conflict of Interest


A conflict of interest is very sensitive problem at financial intermediaries when interests of different groups (owners, investors, employees or other) cross each other. All employees in investment market should reach the best option for the client in theory, but in practice many problems arise. 


There are many tools including SEC regulations, inner rules of the company, “Chinese Walls” and other that are implemented to avoid conflict of interest in financial industry. 


Such conflicts may be created by the employees personally or by a team of employees. For example, if one person let it be a broker, sells for his clients the same stocks that he personally owns, he is obviously breaching all the rules of financial ethics. The team example of interest conflict may be if some analysts are recommending to by particular stocks, when at the same time those stocks are sold by M&A branch of the same investment company.

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