Ethics and Professional Standards
Core concepts
Ethics is the backbone of advisory work. Candidates must understand integrity, objectivity, competence, confidentiality, fair dealing, and conflicts of interest. Know the difference between legal and ethical (something can be legal but unethical). Understand duties to clients, employers, and the profession, and the requirement to act with due care and independent judgment. Be familiar with the idea of a code of ethics and standards of practice, and the obligation to report or avoid misconduct.
Traps in questions
Examiners test loyalty conflicts - e.g., leaving an employer, soliciting clients, or using confidential information. Watch for scenarios where an action is technically permitted but violates the spirit of the standards. Also watch for gifts and entertainment (must not compromise independence) and misrepresentation (omitting material facts can be as bad as lying). The classic trap is choosing the 'legal but unethical' option.
Worked rule of thumb
Apply the headline test: would you be comfortable if the action appeared on the front page of a newspaper? If not, it likely violates the standards. Also apply the client-first test: does the action put the client's interest ahead of your own or your firm's? Example: accepting a lavish gift from a product provider that could bias recommendations fails both tests.
Exam strategy
When two answers seem plausible, choose the one that best upholds client trust and independent judgment, even if it costs the firm revenue.