Ethics and Professional Standards
What to know
Ethics questions test the duty of honesty and fair dealing that underlies all specific rules. Candidates should understand conflict of interest identification, disclosure of compensation from third parties (referral fees), and the obligation to avoid misleading conduct even when no specific rule is broken. Know the difference between legal and ethical - conduct can be lawful yet still subject to discipline if it demonstrates untrustworthiness.
Traps
- Referral fees to unlicensed persons are generally prohibited; disclosure does not cure the prohibition.
- Conflicts: an undisclosed interest in a transaction (e.g., the licensee is a principal) must be disclosed in writing.
- Untrustworthiness is a broad disciplinary ground; answers that rely on "no specific rule was violated" are usually wrong.
- Confidentiality vs. disclosure duty: when a client authorizes disclosure, confidentiality yields to the authorized disclosure.
Rule of thumb
Ask the "headline test": would this conduct look dishonest if printed on the front page? If yes, assume it supports discipline regardless of technical compliance.
Worked example
A licensee buys a client's property through a relative without disclosing the relationship. Even if the price is fair, the undisclosed conflict is a violation because the client could not evaluate the transaction with full information.