Ethics
The Ethics domain tests whether you can recognize the duties that attach when a broker handles confidential financial information, represents a party, and earns a fee. Questions often turn on disclosure, conflicts, confidentiality, and fair dealing rather than on abstract philosophy. The practical standard is: would a reasonable client, after learning the full facts, still consider the conduct honest and loyal?
Core duties
- Act in the client’s best interest within the scope of the engagement.
- Do not misrepresent material facts about the business, the market, or your own qualifications.
- Disclose conflicts, referral fees, and any interest in the transaction.
- Protect confidential information and use it only for the engagement.
- Deal fairly with buyers, sellers, and other advisers; follow anti-discrimination law.
- Account for funds and deposits properly.
Confidentiality is not a license to conceal. A seller may require a buyer to sign a confidentiality agreement before receiving sensitive data, but a broker may not create false financial statements or omit material weaknesses to make a deal close. Materiality is the test: would the fact affect a reasonable buyer’s price or decision?
Worked example
A seller tells the broker that one customer represents 45% of revenue and asks the broker to omit that fact from the information memorandum because it “scares buyers.” The broker should explain that customer concentration is material. The memorandum can present the fact with context-contract length, relationship history, and transition risk-but it should not be hidden. If the seller insists on concealment, the broker should decline the listing or withdraw. Reasoning: the broker’s duty of loyalty does not require participating in deception; misrepresentation exposes the client, the buyer, and the broker to liability and destroys the broker’s reputation.
Traps
- Confusing confidentiality with concealment.
- Failing to disclose a referral fee or a dual role.
- Giving legal or tax advice instead of referring out.
- Using pressure tactics or misleading marketing.
- Treating a verbal “don’t worry about it” as informed consent.
Ethics questions often have a “client asked me to” stem. The client’s request does not override the duty of honesty.