When is a control relationship required to be disclosed to a client?

A control relationship must be disclosed to a client in writing before the completion of the transaction because it entails a potential conflict of interest that could affect the client's decision-making process. By informing the client about the control relationship beforehand, the firm ensures transparency and allows the client to make an informed choice about whether to proceed with the transaction.

In financial services, control relationships can exist when one party has the ability to exert control over another, such as when an investment firm has a significant ownership stake in a company. This type of disclosure is essential for maintaining trust and compliance with regulatory requirements.

Timely disclosure protects the client’s interests and promotes ethical practices in the industry. It is not sufficient to disclose this information after the transaction is completed, on the transaction confirmation, or only upon request, as these methods would not provide the client with the necessary information to assess the relationship's implications before making a commitment.