Professional Ethics and Market Conduct
This domain tests behaviour under pressure: what a licensed person may do with confidential information, how client and firm interests are separated, and which practices are treated as manipulation. Questions are scenario-based, so learn the principle and apply it.
Core duties
Client interest first, integrity, fair dealing, confidentiality, competence, compliance with law and internal rules, and full disclosure of conflicts and costs before a client acts.
Prohibited conduct
- Insider dealing and tipping based on undisclosed price-sensitive information (اطلاعات نهانی), which reaches directors, auditors, major shareholders and employees.
- Market manipulation: wash trades, painting the tape, spoofing and layering, cornering, false rumours.
- Front-running client orders, churning, unauthorised trading, misappropriation of client assets, and unsuitable recommendations.
- Undisclosed gifts or kickbacks and misuse of client information.
Controls that make the rules work
Information barriers between research or corporate finance and trading; restricted lists; pre-clearance and holding periods for personal account dealing; trade surveillance; complaint handling; record retention; escalation to compliance.
Worked example
A dealer learns from a corporate finance colleague that a listed client will announce a large capital increase before the market opens. Reasoning: the information is undisclosed and price-sensitive, so the dealer may not trade the stock, may not pass it to anyone, and may not delay the announcement. The stock goes on the restricted list and any personal account trade needs pre-clearance; an existing trade must be escalated to compliance, not quietly closed.
Traps that cost marks
Believing that tipping a friend is safe because you did not trade yourself; assuming client consent cures front-running; treating personal account rules as advisory; assuming an indirect trade through a relative is outside the rules.