If a licensee discloses a potential conflict of interest and it remains unresolved, what is the recommended action?

• A. Continue representing both parties.
• B. Avoid or withdraw from representing the conflicted party if unresolved.
• C. Ignore the disclosure.
• D. Delay action until closing.

Answer: (B)

When a licensee identifies a potential conflict of interest, simply disclosing it is not enough. If the conflict cannot be resolved so that the licensee can loyally and impartially represent each party, the best course is to avoid or withdraw from representing the conflicted party. This protects the clients’ interests and the licensee’s duties of loyalty, confidentiality, and fair dealing, ensuring neither party is disadvantaged or given improper advice.

Continuing to represent both sides would create competing loyalties and could lead to biased guidance or unequal treatment, which violates ethical obligations. Ignoring the disclosure or delaying action until closing would fail to address the conflict and could expose the parties and the licensee to risk. Therefore, withdrawing from representing the conflicted party is the appropriate action, allowing the licensee to proceed with representation of the other party or to refer them to another professional.