Exam 15: Conflicts of Interest in the Financial Industry

Conflicts of interest is a type of ________ problem that occurs when a person or institution has multiple objectives that are in conflict with each other.

Reputational rents refer to

One problem with conflicts of interest is that they can reduce the ________ in financial markets, thereby increasing ________.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings. This is an example of which remedy of conflicts of interest?

Of the remedies for conflicts of interest, which one is the most intrusive

Which of the following is an example of a bank realizing economies of scope?

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 did not prohibit companies issuing securities from paying the credit-rating agencies to rate them. This is an example of which remedy of conflicts of interest?

Which policy measure bans spinning?

Explain how the market can reduce the incentive for credit-rating firms to take advantage of conflicts of interest.

Which policy measure increased the SEC budget to supervise securities markets?

When financial institutions are able to reduce the costs of information for each service they offer by applying the same information source to each service, we say that the financial institution is realizing