Ethics and Professional Standards
Ethical Framework
Ethics questions test judgment under a professional code. Candidates must understand duties to clients, employers, markets, and the profession, and how to prioritize them. Client interests generally come first; integrity of capital markets and compliance with laws and regulations are foundational. Know the distinction between the letter and spirit of rules-conduct should be ethical even where no rule explicitly applies.
Core Standards
Understand independence and objectivity (avoid gifts or pressures that compromise judgment), misrepresentation (never misstate or omit material facts), misconduct (avoid conduct reflecting poorly on the profession), and duties to employers (loyalty, but not when it conflicts with client or legal duties). Confidentiality applies except where disclosure is legally required or permitted.
Conflicts and Diligence
Identify conflicts of interest and disclose them; ensure recommendations are based on reasonable diligence and adequate research. Distinguish facts from opinions and ensure fair treatment of all clients.
Common Traps
- Assuming loyalty to an employer overrides duties to clients or the law.
- Treating disclosure as a cure-all when it does not resolve the conflict.
- Confusing confidentiality with a duty to conceal illegal activity.
- Believing a technically permitted action is automatically ethical.
Rule of Thumb
When facing a dilemma, ask: Does it serve the client's interest? Is it consistent with market integrity? Would I be comfortable if it were public? If any answer is no, do not proceed. Document reasoning and escalate through compliance channels.