GISI Securities Course Professional Level study materials
GISI Securities Course Professional Level study resources

GISI Securities Course Professional Level: Professional Ethics and Client Conduct

GISI Securities Course Professional Level · Work through your exam, one topic at a time.

All guide sections

Professional Ethics and Client Conduct

The Professional Ethics and Client Conduct domain tests judgement under pressure. The exam rarely asks for a definition; it presents a situation where a commercial incentive pulls one way and the client interest the other, and asks what you do and why.

Duties

  • Fiduciary and best-interest duties: act in the client's interest with skill and care. Suitability requires knowing objectives, financial situation, risk tolerance and knowledge, and matching the product to them.
  • Fair dealing: client orders before principal or proprietary orders, no front-running, no dealing ahead of a published recommendation, fair allocation of a partially filled issue on a pre-disclosed pro-rata basis.
  • Conflicts: disclose, manage or avoid. Disclosure alone does not cure a conflict that biases the advice; if it cannot be managed, decline the business.
  • Confidentiality: client information used only for the purpose collected, shared on a need-to-know basis.
  • Market integrity: no insider dealing, no manipulation, no misleading marketing or performance claims.

Decision framework

Identify the duty and to whom it is owed; identify the conflict and who benefits; test the action against the rule and the firm's policy; ask how it would read in a regulator's report; escalate and document; where doubt remains, the client's interest outranks your compensation.

Worked example

A heavily oversubscribed IPO leaves the firm with only 40% of the shares it bid for. The portfolio manager's personal account appears on the allocation list, and a client order for the same stock is still unexecuted. Correct sequence: proprietary and employee orders are ineligible until client orders are filled in full; the shortfall is allocated pro-rata across entitled client accounts under a written policy disclosed in advance; the personal allocation is removed; the deviation and its rationale are recorded. Buying for the house account ahead of the unexecuted client order in the secondary market would also breach fair dealing.

Traps

  • Equating legal with ethical; conduct can be lawful yet breach a duty of trust.
  • Assuming employer permission or blanket consent removes a conflict - both must be informed and specific.
  • Accepting hospitality, gifts or soft-dollar benefits without assessing influence on advice.
  • Staying silent about a colleague's misconduct because it is not your client; escalation is part of the duty.
  • Presenting simulated or selected past performance as a promise of future returns.