Ethics, Integrity and Professional Conduct
What the exam tests
Ethics questions test whether you can apply a code, not just recite it. Expect conflict-of-interest scenarios, whistleblowing, confidentiality, the ICSI Code of Conduct and the line between legality and ethics.
Core rules and concepts
- Ethical theories: consequentialism or utilitarianism judges outcomes; deontology judges duty and rules; virtue ethics judges character; justice ethics judges fairness and distribution.
- Integrity is consistency between stated values and action. Tone at the top and ethical culture are control environment issues, not slogans.
- Conflicts of interest may be actual, potential or perceived. Disclosure is continuing; recusal and independent approval are typical safeguards.
- Insider information: unpublished price-sensitive information must not be used or selectively shared; the PIT Regulations 2015 require codes, trading-window closures and a structured digital database.
- Whistleblowing: s.177(9) requires a vigil mechanism for listed companies and prescribed classes; LODR Regulation 22 governs its operation. Whistleblowers need confidential access to the audit committee and protection from retaliation.
- Professional conduct: the Company Secretaries Act 1980 and the ICSI Code of Conduct govern integrity, confidentiality, conflict, solicitation and professional misconduct. First and Second Schedules list misconduct categories and attract disciplinary action.
- Ethical decision test: facts; stakeholders; applicable duties and laws; alternatives; consequences; transparency test; act and record.
Worked example
A CFO asks the company secretary to record a board resolution approving a related-party transaction that was never discussed. The company secretary must refuse to create a false record, minute the actual proceedings, and escalate to the chair and audit committee. The transaction needs audit committee approval under s.177 and LODR Regulation 23, and may need shareholder approval. Reasoning: s.166 requires good faith and care; fabricating minutes is professional misconduct and a false disclosure risk. Resignation is not the first step; documented escalation is.
Traps that cost marks
- Equating ethical conduct with mere legal compliance.
- Using confidentiality to conceal illegality.
- Treating a disclosed conflict as automatically cured.
- Assuming whistleblowing protection is automatic without a proper mechanism.