Which statement best describes the MSRB stance on conflicts of interest in research or referral arrangements?

• A. Conflicts must be disclosed and must not harm customers.
• B. Conflicts can be ignored if research is from a reputable firm.
• C. Conflicts must be disclosed, and efforts made to avoid conflicts harming customers.
• D. Conflicts require only internal documentation.

Answer: (C)

The main idea is that when there are conflicts of interest in research or referral arrangements, firms must be transparent with customers and take steps to prevent those conflicts from harming the customer. Disclosure to the client is essential so the investor understands what could influence the research or referral advice. Beyond disclosure, the firm must actively manage or mitigate the conflict to ensure recommendations or referrals aren’t biased by that conflict. This isn’t about relying on reputation or internal paperwork; it requires both informing the customer and implementing controls to protect the customer’s interests.