A conflict of interest arises in investment banking because the banks are attempting to simultaneously serve two client groups
A)the security-issuing firms and the security-buying investors.
B)the government and the stockholders.
C)the government and the security-issuing firms.
D)the security-issuing firms and the lawyers.

Question

Quizplus · Accepted Answer

Investment banks serve both the security-issuing firms (such as companies issuing stocks or bonds) and the security-buying investors (such as individual or institutional investors). This creates a conflict of interest as the investment bank may prioritize the interests of one client group over the other. For example, the investment bank may underprice securities to win business from the issuing firm, but this could result in a lower return for the buying investors.

A Conflict of Interest Arises in Investment Banking Because the Banks