Update 4-17: Is there any need for dealer to inform his client in this scenario?

[MarkFeld]

As he has done at least a few times a year for approximately the past 3 years, client provided dealer with a list of coins for him to review and provide his opinions on in an upcoming auction.

 

The dealer typically lets the client know which coins he approves of and client decides whether and/or how much to bid on them and then places his own bids.

 

Client pays a small commission (between 2% and 5%, depending on the total amount spent in the auction) to the dealer for any lots that he wins.

 

Most recently, in reviewing about 100 coins, dealer recognized 2 of them as his own, which he had consigned to the auction, at no reserve.

 

Dealer liked them when he bought them and still likes them now.

 

Is there any need for the dealer to let his client know that he owns the two coins?

 

If you need additional information in order to answer, please feel free to ask.

[Dcoin]

The coins are nice, nothing to hide, so why not tell it like it is?

 

It eliminates any problems that may arise if said client should win and later find out that his paid, impartial reviewer had a stake in the deal.

 

I cannot see any advantage to not disclosing?

 

[EZ_E]

Is there any need for the dealer to let his client know that he owns the two coins?

 

No, it's not necessary and it's really no big deal but each person must let their own conscience be their guide.

[braddick]

Shouldn't matter either way, but, to be safe, why not offer a free appraisal/opinion on those two coins while disclosing they're yours to the potential buyer/bidder while still collecting a commission on the other 98? Just in the interest of good sportsmanship. Shouldn't cut into the Dealer's take by much and the good will it causes will reap continued benefits in the long run.

[MarkFeld]

Shouldn't matter either way, but, to be safe, why not offer a free appraisal/opinion on those two coins while disclosing they're yours to the potential buyer/bidder while still collecting a commission on the other 98? Just in the interest of good sportsmanship. Shouldn't cut into the Dealer's take by much and the good will it causes will reap continued benefits in the long run.

Pat, to be clear, a commission is charged only if the client bids on and wins the lots. If he doesn't bid and/or doesn't win, there is no charge.

 

By the way, this scenario is not a hypothetical, and tomorrow I will disclose how the dealer handled it.

[braddick]

Sounds good Mark.

My answer to the scenerio doesn't change though. Even if the collector bids and wins those two coins the Dealer disclosed as his with the equal disclosure they're nice coins worthy of consideration, he should pass on accepting a fee. He doesn't have to nor would it be unethical for him to be paid for his services on those two coins, it would simply be a kind gesture on his part toward the client.

It'll solidify the relationship further with that collector and pay dividends in the future.

[gpnyc]

This wouldn't even be a question in my mind. I don't see any valid reason for withholding this information from your client.

[Just Bob]

This wouldn't even be a question in my mind. I don't see any valid reason for withholding this information from your client.

 

(thumbs u

[IGWT]

There is no justification for the dealer's failure to reveal the conflict. The dealer should disclose the conflict of interest and decline to offer his opinion. The client can then decide whether or not he still wants to use and to pay for the dealer's service on those two coins.

[MarkFeld]

There is no justification for the dealer's failure to reveal the conflict. The dealer should disclose the conflict of interest and decline to offer his opinion. The client can then decide whether or not he still wants to use and to pay for the dealer's service on those two coins.

Lou, why should the dealer "decline to offer his opinion" if/once he informs the client that he owns the coins?

 

This wouldn't even be a question in my mind. I don't see any valid reason for withholding this information from your client.

Whether I agree with you or not...what are your reasons for disclosing, as opposed to withholding the information? Thanks.

[CHABSENTIA]

It would seem to me that the Dealer should disclose the fact . What happens if he doesn't and later on the Client discovers it.

 

What is wrong with the Dealer stating that the two coins are his and he would rather not name a price and would ask the client to seek a different opinion on those two coins?

 

Isn't there the possibilty og human nature dictating that the Dealer might have been more subjective in the case of the two coins?What if the Dealer overpaid for them in the first place and then his commission or opinion over priced them even more?

[WinstonWare]

I think the dealer should disclose that they are his consignments but I see nothing wrong with also offering an honest opinion on the coins.

[cpm9ball]

There is no justification for the dealer's failure to reveal the conflict. The dealer should disclose the conflict of interest and decline to offer his opinion. The client can then decide whether or not he still wants to use and to pay for the dealer's service on those two coins.

Lou, why should the dealer "decline to offer his opinion" if/once he informs the client that he owns the coins?

 

This wouldn't even be a question in my mind. I don't see any valid reason for withholding this information from your client.

Whether I agree with you or not...what are your reasons for disclosing, as opposed to withholding the information? Thanks.

 

Mark, if for no other reason, I think the dealer should tell the client in order to help solidify the dealer/client relationship. It may also be suggested that the client might want to get another opinion, but that is entirely up to him. If he sought your advice in the first place, it is no doubt because he respects your opinions. If so, why would he want another opinion.

 

That's my opinion!

 

Chris

[pendragon1998]

Sounds good Mark.

My answer to the scenerio doesn't change though. Even if the collector bids and wins those two coins the Dealer disclosed as his with the equal disclosure they're nice coins worthy of consideration, he should pass on accepting a fee. He doesn't have to nor would it be unethical for him to be paid for his services on those two coins, it would simply be a kind gesture on his part toward the client.

It'll solidify the relationship further with that collector and pay dividends in the future.

 

This sounds fair to me.

[Conder101]

I think the dealer should disclose that he owns them and then give as honest an evaluation of them as possible. I just see it as a smart move because if you don't and the buyer wins them then later learns that you din't disclose that you owned them he may wonder if you had a conflict of interest and may not have discribed them fully. He may then also wonder if there were other cases of this having happened. This could lead to him losing faith in you and whether or not you are advising him impartially.

 

It just works out much better if you are completely honest with him and provide full disclosure up front. That way he knows that you are not hiding anything from him.

[gmarguli]

The dealer should inform the client that he is the owner of the coin. Regardless of how honorable his intentions are and/or how objective he THINKS he can be, there is still a potential conflict of interest. It's far better to disclose the information (unnecessarily) than to risk not revealing it when the dealer should do so.

[gpnyc]

This wouldn't even be a question in my mind. I don't see any valid reason for withholding this information from your client.

Whether I agree with you or not...what are your reasons for disclosing, as opposed to withholding the information? Thanks.

 

This goes back to my formal training as a CPA. Our code of ethics considers simply the appearance of a conflict of interest the same as an actual conflict of interest, whether or not one actually exists. Disclosure would be compulsory.

 

In sum, not only would I feel obligated to disclose this information to my client, in my line of work, I would actually be obligated to do so.

[EZ_E]

The dealer should inform the client that he is the owner of the coin. Regardless of how honorable his intentions are and/or how objective he THINKS he can be, there is still a potential conflict of interest. It's far better to disclose the information (unnecessarily) than to risk not revealing it when the dealer should do so.

 

Well, I reckon that I've changed my position from such convincing arguments although I still feel that it is a very minor infraction since the client asked Mark to look at the coins without coaching.

[IGWT]

There is no justification for the dealer's failure to reveal the conflict. The dealer should disclose the conflict of interest and decline to offer his opinion. The client can then decide whether or not he still wants to use and to pay for the dealer's service on those two coins.

Lou, why should the dealer "decline to offer his opinion" if/once he informs the client that he owns the coins?

Providing the service creates an obligation on the part of the client to pay the dealer in the event that the client bids on and wins the coins at auction.

 

Looking at it from the dealer's perspective, the dealer deserves to be paid for his services, and he should not provide those services -- his opinioin on the coins -- without first confirming that the client wants the informtion despite the conflict of interest.

 

Looking at it from the client's perspective, the client doesn't want to undertake an obligation to pay for an opinion that he might choose to discount under the circumstances. Providing the opinion without first giving the client the opportunity to say "no thanks" places him in the position of paying for something that he didn't necessarily want.

 

 

[Oldtrader3]

I'm with Braddick on this one.

[MikeInFL]

No question, the conflict of interest should be reported to the client/prospective bidder....Mike

[DirtyGoldMan]

Is there any need for the dealer to let his client know that he owns the two coins?

 

Absolutely.

[MikeInFL]

p.s. as a corollary, should the dealer get their normal commission on those coins? I can see both sides of that argument, and the answer is less clear-cut to me.

[TomB]

It appears to me that the best course of action would be for the dealer to tell the client upfront that these are his consigned coins. The dealer can still give his opinion on the coins and can attempt to be objective as possible, however, the client will be in a better position to weigh if there might be additional subliminal motivation on the part of the seller when reviewing the comments. Additionally, the dealer-client relationship may suffer should the client find out that these coins were owned by the dealer at the time of analysis, regardless of whether or not the client actually bids on or wins the coins. In this case, it is just good business sense to disclose the information to the client. In my opinion, the dealer might excuse himself from accepting a fee in this case since the advice might be viewed as biased and also because the dealer should already be quite familiar with the coins and would not need to spend extra time analyzing them for his fee.

 

The only scenario that I can think of where the dealer would not divulge the ownership of the coins would be if the dealer wanted complete anonymity as far as ownership of the coins. In this case, the dealer may do well to tell the client that he is familiar with the source of the coins and would feel less of a potential conflict if he were to not analyze the pieces.

[michael]

Most recently, in reviewing about 100 coins, dealer recognized 2 of them as his own, which he had consigned to the auction, at no reserve.

 

Dealer liked them when he bought them and still likes them now.

 

Is there any need for the dealer to let his client know that he owns the two coins?

 

 

YES!!!!!!!!!!!!!!!!!!!!!!!!! FULL DISCLOSURE

[rons]

I believe that if the buyer and the dealer reverse roles and consider the facts it should be obvious. Would I be upset to discover coins not identified but owned by my dealer? I think the relationship could be strained as a result unless there is a long relationship that has been mutually beneficial. There are some variables here but I believe that if the dealer reveals his holdings up front then no matter what happens there won't be any hard feelings or misunderstanding.

[World Colonial]

As long as the dealer is not recommending a bid and evaluates them impartially, I do not believe it is necessary to provide disclosure. Others might see it different. A dealer who has provided the same service to me only tells me his opinion of the grade and whether the coins will grade or will be rejected by NGC or PCGS. I provide the maximum bids and he places them for me.

[World Colonial]

You make a good point but in the dealer example that I used, the fact that I bought a coin from him (on eBay) that is probably an NGC reject bothers me more. The two are not mutually exclusive but I expect someone like him to properly describe the coins he sells. I did not specifically ask but he did tell me that another listed coin that I wanted to buy was rejected by NGC. This was not disclosed in the listing.

[leeg]

Full disclosure would be key to maintaining a positive future long term relationship. Said dealer was aware of the attributes for the two coins so no need for additional time to examine them, no fee required.

[MarkFeld]

Thanks for the many good replies on both sides of the issue.

 

"And now, the rest of the story"......

 

It was an easy decision for me, and one that I made before I started this thread. I let my client know that I owned the two coins, what I had paid for each and that I had tried and failed to cross one of them. I didn't ask him if he was going to bid on them, but if he ended up bidding and won either or both, I know he will tell me.

 

I sort of like the idea of not charging commission if he was successful. However, based on our previous dealings, where he often tries to pay me more commission than I charge him and I often try to charge him less commission than he thinks he should pay me, I already know it would end up being yet another dealer-client "dispute".

 

I strongly believe in full disclosure, so, for example, I also let clients know if I have personal interest in any coins they have asked me to view for them and/or if another client has inquired about the same coin(s). It really is so much better and easier when a relationship is based upon MUTUAL trust.