CCM Conflict of Interest Management 2

Question 1

A bank loan officer is asked to underwrite a loan for a company in which her spouse holds a 15% ownership stake. What is the most appropriate first step?

Accepted Answer

Disclose the relationship and recuse herself from the decision

Answer

Disclosure followed by recusal removes the conflicted employee from the decision and preserves objectivity.

Question 2

Under Regulation O, which group of individuals is subject to restrictions on extensions of credit from a member bank?

Accepted Answer

Executive officers, directors, and principal shareholders and their related interests

Answer

Regulation O governs credit to bank insiders: executive officers, directors, principal shareholders, and their related interests.

Question 3

Which situation best describes an 'apparent' (perceived) conflict of interest rather than an actual one?

Accepted Answer

A compliance manager's college roommate works at a vendor she oversees, though no benefit is exchanged

Answer

A perceived conflict exists when a reasonable person might question objectivity even without an actual benefit or bias.

Question 4

How often should a financial institution generally require employees and directors to reaffirm conflict-of-interest disclosures?

Accepted Answer

At least annually and whenever circumstances change

Answer

Annual certifications plus event-driven updates keep disclosures current and are an industry best practice.

Question 5

A director's brother-in-law owns a construction firm bidding on the bank's branch renovation. What control most effectively mitigates the conflict?

Accepted Answer

Having the director abstain from discussion and voting, with the remaining board approving at arm's-length terms

Answer

Abstention by the interested director and approval on arm's-length terms by disinterested members addresses the conflict.

(CCM) Certified Compliance Manager Practice Test

(CCM) Certified Compliance Manager Practice Test

CCM Conflict of Interest Management 2