FINRA Investment Banking Representative Practice Exam

When there is a conflict of interest before selling a new issue, the correct requirement is to provide oral disclosure prior to the sale and written disclosure upon settlement. This approach ensures transparency and protects the interests of the investors.

The reason for the oral disclosure prior to the sale is to inform potential investors about the conflict before they make an investment decision. This timely communication allows investors to evaluate the situation and consider how the conflict may impact their investment. Written disclosure upon settlement serves as a formal record that the investors were made aware of the conflict, ensuring compliance with regulations and providing legal protection for the issuer and underwriters.

This dual approach reinforces the standard practice of keeping investors fully informed, which is crucial for maintaining trust in the financial markets and adhering to regulatory requirements. In contrast, alternatives such as relying solely on prospectus disclosure, notifying investors only after the sale, or seeking legal counsel do not adequately protect investor interests or comply with best practices in conflict management.