The syndication agreement generally creates a principal/agent relationship in which the syndicator (agent) is empowered to act on behalf of the investors (principals). In most principal/agent relationships, there is the concern that the agent will act in the agent's best interest, not in the best interests of the principal. This issue is more commonly referred to as:

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Moral hazard refers to the risk that the agent (syndicator) may take actions that benefit them but are not in the best interest of the principal (investors). This risk arises due to the asymmetry of information between the principal and agent. Adverse selection, dual agency, and signaling are different concepts related to agency relationships.

The Syndication Agreement Generally Creates a Principal/agent Relationship in Which