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CS Professional · IFSCA - Regulations, Listing and Compliances · Capital Market Intermediaries

Aarav Advisors IFSC is a registered intermediary. Its relationship manager wishes to recommend a product to a client mainly because the firm earns a higher commission on it, although a cheaper product better fits the client's stated needs. Which code-of-conduct principle is most directly violated?

The principle violated is the duty to avoid conflict of interest and place the client's interest ahead of the firm's own. Recommending a less suitable product for higher commission prioritises the intermediary's gain, which conflicts with fair dealing and client-interest obligations in the code of conduct.

  1. ADuty to file annual returns on time
  2. BDuty to avoid conflict of interest and place client interest ahead of its ownCorrect
  3. CDuty to maintain minimum net worth
  4. DDuty to appoint a compliance officer

Explanation

Intermediaries must act in the best interests of clients and avoid or properly manage and disclose conflicts of interest. Recommending a costlier product for higher commission puts the firm's interest first. The other duties exist but are not what is breached here.

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