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Conflicts of Interest in the Financial Services Sector Essay


Conflicts of Interest in Financial Services are among the many chapters, which appear in John Boatright’s book, The Gift that Keeps on Asking. This chapter is built on the financial services sector, highlighting the persistent conflicts of interest, that stand between investment and the financial banking functions in the United States. Conflicts of interest are of different types ranging from actual to potential ones. Following the many causes and effects of these conflicts in the financial services sector, the stock market crash of 1929 is thought to have resulted from the comprehended conflict that arose between the aforementioned commercial and investment services of the United States. How does a conflict of interest occur?

Although, a variety of definitions have been suggested, highlighting the meaning of a conflict of interest, the resulting arguments concerning the definitions appear irrelevant about their implication, in the financial industry.

It is worth noting that conflicts of interest form a good part of the financial services. This follows from the ever-present functions of agent and fiducially, as they endeavor to serve other peoples’ interests. consequently, a conflict of interest arises when an individual and/or an organizational concern interposes the organization or individual’s power to work towards the concerns, or some other party if at all the person or the organization holds an authorized responsibility to work in the direction of the party’s interests. Conflicts of interest appear in various kinds as expounded next.

The prevailing distinctions of conflicts of interests as applied in other fields also stand relevant in the area of the financial services industry. The first distinction involves actual and potential conflicts. While the actual conflict of interest comprises of misbehaviors that stand in certain situations, the latter category, though can be kept off, is treated as an inescapable aspect of particular circumstances. Also, while actual conflicts of interests arise when people or organizations work in opposition to another party’s interest, the interest of which the people or the institution is bound to serve, potential conflicts may be viewed as conditions that favor the occurrence of actual conflicts.

Personal and impersonal conflicts provide the second distinction. A conflict of interest passes for personal if the actual or potential interference of the performance of a certain duty of serving another party’s interest is beneficial to a person or an organization. The final distinction lies between individual and organizational conflicts of interest. Since both people and organizations serve as agents, they play fiduciary roles. Outstanding is the fact that the failure of an organization to serve some interest does not always imply that the individuals are at fault. Nevertheless, one would wonder why conflicts of interest occur.

Several reasons explain the occurrence of conflicts of interest in financial services. To begin with the interference by an interest in the performance of one of the duties of the agency or fiduciary leads to a conflict of interest.

Besides, financial service givers perform duties, which are subject to conflicts. This follows from the fact that the obligations are not based on profession. Moreover, since the law designs and specifies all the duties of the financial institution, some of the designs are default, paving the way to conflicts of interests. Finally, self-interest acts as the force behind the financial service providers, thus, raising the chances for the entry of conflicts of interest. Having expounded on the subject of conflicts of interest, it stands out that the United States’ market crash of 1929 came because of these conflicts.

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IvyPanda. (2020, December 30). Conflicts of Interest in the Financial Services Sector. Retrieved from https://ivypanda.com/essays/conflicts-of-interest-in-the-financial-services-sector/

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"Conflicts of Interest in the Financial Services Sector." IvyPanda, 30 Dec. 2020, ivypanda.com/essays/conflicts-of-interest-in-the-financial-services-sector/.

1. IvyPanda. "Conflicts of Interest in the Financial Services Sector." December 30, 2020. https://ivypanda.com/essays/conflicts-of-interest-in-the-financial-services-sector/.


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IvyPanda. "Conflicts of Interest in the Financial Services Sector." December 30, 2020. https://ivypanda.com/essays/conflicts-of-interest-in-the-financial-services-sector/.

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IvyPanda. 2020. "Conflicts of Interest in the Financial Services Sector." December 30, 2020. https://ivypanda.com/essays/conflicts-of-interest-in-the-financial-services-sector/.

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IvyPanda. (2020) 'Conflicts of Interest in the Financial Services Sector'. 30 December.

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