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 >>
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 Earnest Money?

    An earnest money deposit shows the seller that a buyer is serious about purchasing a property.
  7. 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 ...
  8. 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 ...
  9. Professionals

    What's Human Capital?

    Human capital is a company asset, but it’s not listed on the balance sheet. Human capital is all of the creative skills and knowledge embodied in the employees of a company -- skills that bring ...
  10. Professionals

    What are Fringe Benefits?

    Fringe benefits are non-monetary compensation employers give to employees. They are often associated with high priced perks given to top executives, but any employee can receive them. Fringe ...

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center