When is a lawyer's conduct "subject to disqualification"?

A lawyer's conduct is typically "subject to disqualification" in scenarios where a conflict of interest exists. Conflicts of interest arise when a lawyer's ability to represent a client effectively is compromised due to competing interests, such as representing clients with adverse positions or having personal stakes in the matter.

Disqualification occurs to protect the integrity of the legal process as well as the interests of clients. It ensures that lawyers maintain loyalty and confidentiality to their clients, which are core ethical obligations. A situation that leads to potential civil or criminal penalties may involve various ethical or legal issues, but these do not intrinsically relate to the concept of disqualification in the same direct manner that a conflict of interest does.

Being disqualified due to a conflict serves to uphold public confidence in the legal profession, ensuring that attorneys operate without biases that may compromise their duties. Thus, the correct answer reflects the principle that a lawyer's conduct is subject to disqualification primarily when there are potential conflicts of interest that might interfere with proper representation.