Conflict Of Interest

AAA

DEFINITION of 'Conflict Of Interest '

A situation where a professional, or a corporation, has a vested interest which may make them an unreliable source. The interest could be money, status, knowledge or reputation for example. When such a situation arises, the party is usually asked to remove themselves, and it is often legally required of them.

INVESTOPEDIA EXPLAINS 'Conflict Of Interest '

An example of a conflict of interest would be a board member voting on the induction of lower premiums for companies with fleet vehicles when he is the owner of a tow truck company outside of the corporation. In relation to law, representation by a party with a vested interest in the outcome of the trial would be considered conflict of interest, and the representation would not be allowed.

RELATED TERMS
  1. Interlocking Directorates

    A common business practice where a member of a company's board ...
  2. Fiduciary Fraud

    Illegal practices committed by financial institutions and financial ...
  3. Major Fraud Act Of 1988

    A piece of legislation passed during the Reagan administration ...
  4. Revolving Door

    The movement of high-level employees from public sector jobs ...
  5. Stuffing

    The act of selling undesirable securities from the broker-dealer's ...
  6. Corporation

    A legal entity that is separate and distinct from its owners. ...
RELATED FAQS
  1. Are arm's length transactions always better than transactions not at arm's length?

    Arm's length transactions occur between parties that are strangers, or between entities separate and unique from each other. ... Read Full Answer >>
  2. Why is social responsibility important to a business?

    Social responsibility is important to a business because it demonstrates to both consumers and the media that the company ... Read Full Answer >>
  3. Why are business ethics important?

    Several factors play a role in the success of a company that are beyond the scope of financial statements alone. Organizational ... Read Full Answer >>
  4. How important are business ethics in running a profitable business?

    A number of factors play a part in making a business profitable, including expert management teams, dedicated and productive ... Read Full Answer >>
  5. How do business ethics differ among various countries?

    Business ethics is the study of business policies and practices, such as corporate governance, insider trading, bribery, ... Read Full Answer >>
  6. Are waivers of subrogation clauses ever ineffective in preventing a third-party lawsuit?

    Sometimes waiver of subrogation clauses are ineffective at preventing a third-party lawsuits. In determining who is responsible ... Read Full Answer >>
Related Articles
  1. Markets

    What Investors Can Learn From Insider Trading

    Some insider trading is actually legal - and can be extremely telling for investors.
  2. Economics

    Defining Illegal Insider Trading

    The better you understand why insider trading can be criminal, the better you'll understand how the market works.
  3. Mutual Funds & ETFs

    Why Late Trading Is Illegal

    Institutional investors got a sweet deal that soured retail investors' mutual fund returns.
  4. Options & Futures

    Putting Management Under The Microscope

    We tell you where to find the telltale signs of corporate misdeeds.
  5. Options & Futures

    The Chinese Wall Protects Against Conflicts Of Interest

    After the crash of 1929, this barrier helped define ethical limits, but it did little to prevent fraud.
  6. Economics

    What is a Moral Hazard?

    The risk that a party to a transaction has not entered into the contract in good faith, or has provided misleading information.
  7. Economics

    Understanding Externality

    An externality is a consequence of an economic activity that is experienced by unrelated third parties.
  8. Economics

    What is Earnest Money?

    An earnest money deposit shows the seller that a buyer is serious about purchasing a property.
  9. Investing

    What's a Transfer Price?

    A transfer price is what one unit of a business charges another unit of the same business for a good or service. The transfer price is usually close to the prevailing market rate when different ...
  10. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center