Ethical Conduct
What the exam tests
Ethical Conduct tests whether you can apply the ACI Model Code and wider market-integrity principles to realistic dealer situations: conflicts of interest, confidentiality, personal account dealing, client order handling and whistleblowing. Questions often turn on the gap between what is legal and what is ethical.
Core rules
- Integrity and commitments. The Model Code's heritage is 'my word is my bond': a commitment given by voice or chat is binding in substance, not only once documented.
- Confidentiality. Client and firm information must not be used for personal gain or shared beyond need-to-know; the duty survives leaving the firm.
- Conflicts of interest. Identify, disclose and manage. Personal account dealing, gifts and entertainment and outside business interests normally require pre-clearance.
- Market conduct. Front-running, insider dealing, spoofing and benchmark manipulation are ethical failures as well as regulatory breaches. Information barriers protect non-public information.
- Whistleblowing. Raise concerns through internal channels; retaliation is prohibited, and many regimes protect external disclosure to regulators.
Worked example
A dealer at a bank receives a large corporate client order to buy EUR/USD at the fix. Before executing, the dealer buys for their own book, expecting the fix to move. The trade is profitable.
Reasoning: the dealer has misused confidential client information and placed their own interest ahead of the client's. This is front-running, a conflict of interest and likely market abuse. The correct conduct is to decline personal trading, execute the client order in line with instructions, and escalate any pressure to do otherwise. Profit does not cure the breach; the information asymmetry and intent matter.
Traps
- Assuming 'everyone does it' or 'the client was not harmed' is a defence; ethical standards are objective.
- Confusing disclosure with management: telling the client about a conflict does not always resolve it.
- Forgetting that chat messages and recordings are evidence.
- Treating whistleblowing as disloyalty; it is a protected control.