Professional Conduct, Ethics and Market Integrity
This domain tests the standards expected of brokerage staff when competing interests, confidential information and market signals collide. The exam focuses on insider trading, manipulation, conflicts, confidentiality and fair client treatment.
Core rules and concepts
- Do not deal or encourage others to deal on inside information; information is inside information if it is precise, non-public and likely to affect price.
- Market manipulation includes false or misleading orders, wash trades, layering, spoofing and conduct that creates an artificial price or volume signal.
- Manage conflicts through disclosure, information barriers, personal-account dealing rules and independent oversight.
- Protect client confidentiality; share information only on a need-to-know basis or with lawful authority.
- Client interests must not be sacrificed to firm or employee benefit; inducements and gifts must follow policy.
Worked example
An analyst learns from an adviser that a listed company will announce a takeover before the market opens. The analyst places a personal buy order through a colleague’s account. The correct reasoning is that the information is precise, non-public and price-sensitive. The trade is insider trading even though the analyst did not work on the deal and used another account. The firm must escalate, preserve records, restrict access and consider regulatory notification. A disclosure or Chinese-wall policy does not cure the misuse.
Traps that cost marks
- Assuming inside information must come from a director or direct source.
- Treating a small personal trade as immaterial.
- Using confidentiality as a reason not to escalate suspected abuse.
- Confusing disclosure of a conflict with permission to act on it.
Exam focus
Insider trading, manipulation and conflict-of-interest scenarios dominate.