Future Business Leaders of America (FBLA) Business Law Practice Exam

What does self-dealing refer to in business law?

1. Agents making deals beneficial to their principals

2. Agents making deals that benefit themselves instead of their principals

3. Agents acting in the best interest of shareholders

4. Agents avoiding conflict of interest

The correct answer is: Agents making deals that benefit themselves instead of their principals

Self-dealing in business law specifically refers to situations where agents or fiduciaries enter into transactions that primarily benefit themselves rather than the interests of their principals or clients. This concept is rooted in the fiduciary duty that agents owe to their principals, which requires them to act in the best interest of those they represent. When an agent engages in self-dealing, they breach this duty by prioritizing their own interests over those of their principals, potentially leading to conflicts of interest and undermining trust in fiduciary relationships. In contrast, options that mention agents making deals for their principals, acting in the best interest of shareholders, or avoiding conflicts of interest do not align with the definition of self-dealing. These options imply behavior that is consistent with fiduciary duty and ethical business practices, whereas self-dealing is characterized by the pursuit of personal gains at the expense of the principal's best interests. Thus, the correct understanding of self-dealing is reflected in the definition provided in the chosen answer.