Ethics and Professional Standards
Why ethics is examined separately
The code of ethics sits above the legal minimum: integrity, objectivity, competence, confidentiality, professionalism and fair dealing. Where law and code differ, apply the stricter standard. Exam questions ask you to identify the conflict, state the duty owed, and choose the action protecting both client and market integrity.
Conflicts of interest
Identify, disclose, manage, avoid. Typical conflicts: remuneration linked to product sales, proprietary trading against client orders, gifts and entertainment, outside business interests, and allocation of oversubscribed issues. Personal account dealing requires pre-clearance, minimum holding periods, and no dealing ahead of client orders (front running) or on inside information. The 'mosaic' defence covers assembling public and non-material information - it does not cover material non-public information received in breach of confidence.
Worked example
An analyst learns of an unannounced takeover from a colleague in corporate finance. The correct action: do not trade, do not tip anyone, escalate immediately to compliance, and expect research coverage to be restricted. Reasoning: the information is material and non-public, and the duty runs to the market as well as to clients.
Traps
Believing disclosure alone cures a conflict; confusing confidentiality with secrecy (client information may be disclosed where legally compelled); and assuming a gift is trivial without checking the firm's threshold.