When is a conflict of interest deemed to occur for an issuer?

A conflict of interest is deemed to occur for an issuer primarily when the issuer is a broker-dealer or closely associated individuals. This situation arises due to the inherent risk of self-dealing, where the interests of the issuer may conflict with those of investors or the public. When an entity is both an issuer and a broker-dealer, it may prioritize its own financial interests over those of its clients or shareholders, which can lead to ethical dilemmas and a potential breach of fiduciary duties.

The nature of financial transactions requires that all parties involved operate transparently and without biased influences that could impair judgment or lead to unfair treatment of investors. Therefore, in the context of the securities markets, regulatory bodies like FINRA closely monitor such relationships to ensure fair practices and protect investor interests.

While there may be other situations that can create various types of conflicts (for example, going public or the amount of funds raised), those scenarios do not inherently highlight the same level of risk as the direct association of brokerage and issuer functions, which is why the association of the issuer being a broker-dealer or closely associated is the clear trigger for a conflict of interest.