Under Canadian ethical standards for investment professionals, which of the following situations most clearly represents a conflict of interest that must be disclosed and managed?

Question: Under Canadian ethical standards for investment professionals, which of the following situations most clearly represents a conflict of interest that must be disclosed and managed?

Answer options:

• An advisor recommends the same mutual fund to several clients with similar risk profiles. ✅ An advisor receives a commission for selling an investment product when they are also compensated by a flat-fee for advice.
• An advisor invests personal funds in the same securities as their clients, provided the client trades are executed first.
• An advisor attends industry professional development seminars to stay current.

Correct answer: An advisor receives a commission for selling an investment product when they are also compensated by a flat-fee for advice.

Explanation: Receiving a commission while also being paid a fee for advice can create a conflict as it may incentivize the advisor to recommend certain products over others. This must be disclosed and managed to ensure unbiased advice.