Are outside business activities that could use client data or affect objectivity required to be disclosed to clients before they begin?

• A. Disclose the OBA to clients after it begins and obtain oral consent.
• B. Notify the firm only.
• C. Consider OBA but do not inform clients to preserve objectivity.
• D. Disclose the OBA to clients and obtain written consent; ensure it does not impair impartiality or create a material conflict.

Answer: (D)

When a financial professional has an outside business activity that could use client data or affect objectivity, the client must be informed before the activity begins and explicit written consent obtained. This ensures the client understands any potential conflicts and how their information might be used, and it creates a documented agreement about maintaining impartiality.

This is the strongest approach because it protects the client's interests and the advisor’s duty of transparency. Written consent is important because it provides clear evidence of the client's agreement and understanding, reducing the risk of later disputes about conflicts of interest.

Disclosing only after the activity starts, or only notifying the firm, fails to give the client a chance to weigh the impact or to withhold consent. Not informing clients at all to “preserve objectivity” contradicts fiduciary duties to disclose conflicts and safeguard client interests.