Professional Ethics and Compliance flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Integrity

The ethical duty to be honest, straightforward and consistent between stated values and actual behaviour, including admitting errors rather than concealing them from clients, colleagues or regulators.

Conflicts of interest

Situations where professional judgement or duty to a client could be influenced by a competing interest. Firms must identify, then avoid, decline, disclose or manage them with controls.

Independence threats

The five recognised categories that can compromise objectivity: self-interest, self-review, advocacy, familiarity and intimidation. Each threat requires identification and an appropriate safeguard.

Confidentiality duty

The obligation not to disclose client or firm information without authority. It survives the end of the relationship and yields only to legal requirement, court order, regulator demand or informed consent.

Whistleblowing

Reporting suspected wrongdoing through internal or protected external channels. Protection generally requires a reasonable belief and a qualifying recipient under the applicable disclosure regime.

Fit and proper

The standard used to assess individuals in regulated roles, typically covering honesty and integrity, competence and capability, and financial soundness, assessed on an ongoing basis.

Professional scepticism

An attitude of questioning information and evidence rather than accepting it at face value, applied even when no specific fraud or error indicator has yet been identified.

Gifts and hospitality

Benefits offered or received that could create obligation or perceived influence. They are recorded, subject to monetary thresholds and require pre-approval above those limits.

Three lines model

A governance structure: the first line owns and manages risk, the second provides independent compliance and risk oversight, and internal audit gives independent assurance to the governing body.

Risk-based approach

Allocating compliance resources according to assessed risk, usually likelihood multiplied by impact, prioritising the highest residual risk remaining after existing controls are considered.

Principles-based regulation

Outcome-focused rules that sit above detailed requirements. Satisfying a specific rule does not by itself cure a breach of the underlying principle, such as fair treatment of customers.

Senior manager regime

A framework assigning prescribed responsibilities to named senior individuals. Defending a breach typically requires documented evidence of reasonable steps, oversight and challenge.

Insider dealing

Trading, or encouraging others to trade, on inside information, or unlawfully disclosing it. Controls include insider lists, restricted dealing windows and trade surveillance.

Market manipulation

Conduct that gives false or misleading signals about supply, demand or price, such as wash trades or spoofing, and which undermines market integrity and confidence.

Customer due diligence

Identifying customers and verifying identity, establishing beneficial ownership and understanding the purpose of the relationship, with enhanced measures applied to higher-risk cases.

Suspicious activity report

A confidential disclosure to the financial intelligence unit when there is knowledge, suspicion or reasonable grounds to suspect money laundering or terrorist financing, often triggering a prohibition on tipping off.

Regulatory change assessment

A structured review of new or amended rules to identify affected processes, systems and controls, assign owners and evidence implementation before the effective date.

Record retention

Keeping records that evidence decisions, advice, conflicts management, training and monitoring for the minimum period required by the applicable regulatory regime.

Conduct risk

The risk that business behaviour, including sales practices, incentives or product design, causes harm to customers, market integrity or the firm's reputation.

Tone from the top

Visible commitment by senior leaders to ethical standards, credible only when reinforced by middle managers who apply stated values to daily decisions and challenge poor behaviour.

Speak-up culture

An environment where staff raise concerns without fear. It requires accessible channels, protection from retaliation and visible action following reported issues.

Treating customers fairly

The outcome-based expectation that products are designed for identified needs, communications are clear, advice is suitable and no post-sale barriers are imposed.

Near-miss reporting

Recording incidents that could have caused harm but did not. Rising near-miss reports usually indicate a healthy culture; falling reports alongside rising incidents are a warning sign.

Malus and clawback

Remuneration mechanisms allowing deferred or paid variable pay to be reduced or recovered after misconduct, risk failures or restatement, aligning reward with longer-term outcomes.

Culture indicators

Measurable signals of conduct health, including complaints root causes, breach trends, escalation quality, staff survey results, attrition and remuneration outcomes.

Incentive alignment

Designing performance metrics so that reward does not encourage volume or revenue at the expense of fair customer outcomes, risk limits or regulatory obligations.

Risk appetite statement

A governing body-approved document translating strategy into quantified risk tolerances and limits, with defined escalation and remediation when a breach occurs.

Compliance independence

Structural arrangements protecting the compliance function, including a reporting line to the governing body, separate budget, full record access and no revenue targets.

Governing body oversight

Setting strategy and risk appetite, challenging management, and ensuring the compliance function has sufficient authority, resources and independence to operate effectively.

Delegated authority

Formally documented transfer of decision-making tasks to a named individual or committee. It transfers execution, not ultimate accountability, which remains with the governing body.

Key risk indicators

Forward-looking metrics that signal rising exposure, such as complaint volumes, overdue remediation or training completion, used to trigger management action before losses occur.

Scenario testing

Exercising the strategic plan against plausible shocks such as regulatory change, conduct failure, cyber incident or market stress to test resilience and identify gaps.