Which of the following is a method to mitigate conflicts of interest in trading?

The selected answer emphasizes the importance of preventing potential conflicts of interest that can arise when the same individual exercises discretion over trading for different client types. When one person is responsible for managing investments for multiple clients, their decisions may inadvertently prioritize one client’s interests over another's. By prohibiting discretion by the same person for different client types, an advisory firm can establish clearer boundaries and ensure that each client's unique needs and objectives are met without bias or preference.

This separation of responsibilities promotes fairness and helps guard against situations where favorable trades for one client might disadvantage another. It aligns with effective compliance practices, as it encourages accountability and provides a framework that supports ethical trading behaviors. Furthermore, this method contributes to transparency and instills confidence in clients that their investment strategies are being handled with integrity.

While other methods could provide some level of conflict mitigation, the prohibition of discretionary authority being held by the same person is particularly robust as it directly addresses the issue of conflicting interests at a structural level within the firm.