Conflicts of Interest

A conflict of interest exists, when a person or business has more than one financial or other interest and serving one of those interests may work to the detriment of another party. A conflict exists when two interests are in direct conflict with each other and there is a risk that the professional judgment or action of a party will be unduly influenced or compromised.

Conflicts of interest are very common and are not illegal, but they must be fully disclosed and approved by each party having an interest.

A common example is when a property management company hires a maintenance worker to repair a client's property and the management company owns the maintenance company. The client must be advised in advance of the relationship so the client can make an informed decision about hiring the maintenance company. The disclosure allows the client to weigh the advantages and disadvantages of using the particular maintenance company before any money in spent.

Making a full disclosure in advance is the ethical thing to do. Failing to make such a disclosure is clearly unethical.

An arm's length transaction involves parties who act independently of each other, thus avoiding a conflict of interest.
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