Ethics, Conduct and Market Integrity
Standards of Behaviour
Candidates should understand the core conduct standards: honesty and integrity, due skill and care, fair treatment of clients, managing conflicts, market abuse prohibitions (insider dealing, market manipulation, unlawful disclosure), and personal account dealing rules. Know the difference between a bribe and a legitimate gift or hospitality, and the role of fitness and propriety in ongoing supervision.
Traps
Questions often test intent versus effect: market abuse can occur without intent to deceive, and a trade may be manipulative even if it loses money. Another trap is treating disclosure as a cure for a conflict; disclosure is a last resort, not a substitute for avoidance or management. Watch for questions that suggest a gift is acceptable because it is small; the test is whether it could influence behaviour and whether it is disclosed and approved under policy.
Rule of thumb
Apply the "headline test": if the conduct were reported publicly, would the firm be comfortable defending it? If not, escalate before acting.
Worked example
An analyst learns of an unannounced acquisition and buys shares through a friend's account. There is no direct dealing by the analyst, but this is still insider dealing and unlawful disclosure. The prohibition attaches to information, not to the account used.
Reporting, Disclosure and Recordkeeping
What, When, and to Whom
Candidates must know the reporting obligations that attach to a regulated firm: regulatory returns (financial, prudential, conduct), event-driven notifications (breaches, significant incidents, changes in control, material outsourcing), transaction reporting, and client disclosure. Understand recordkeeping requirements: what must be retained, for how long, in what form, and how it must be retrievable. Know the difference between internal management information and regulatory reporting, and the importance of data accuracy and reconciliation.
Traps
Examiners test whether a near-miss must be reported (often yes, if it meets the incident threshold, even without loss). Another trap is confusing the retention period for client records with the retention period for communications, which may differ. Also watch for questions implying a breach notification can wait until the root-cause analysis is complete; the notification is usually required promptly, with the analysis following.
Rule of thumb
Report first, explain later. If an event may meet a notification threshold, notify within the required timeframe and update as facts develop. Late reporting is itself a breach.
Worked example
A firm discovers a data incident affecting client records on Friday. It must assess whether the threshold is met and notify the supervisor within the prescribed period, even though the investigation is incomplete. The initial notification states the known facts and commits to a follow-up report.