What should a broker do if they see a potential conflict of interest arise?

In situations where a broker identifies a potential conflict of interest, the most appropriate action is to disclose the conflict in writing to the client. This approach ensures clear and formal communication, providing the client with a record of the disclosed information. Written disclosure helps protect both the broker and the client, as it establishes transparency and demonstrates that the broker is acting in good faith while prioritizing the client’s interests.

By documenting the conflict, the broker allows the client to make informed decisions based on all relevant information. This aligns with ethical practices and regulatory requirements within the industry, which emphasize the importance of transparency to maintain trust in the client-broker relationship.

Verbal disclosures can be helpful, but they lack the permanence and clarity that written communication provides. Disregarding the conflict or keeping it secret undermines the ethical standards expected in the brokerage profession and can lead to significant repercussions for both the client and the broker.