Regulation and Ethics
What the exam tests
Regulation and Ethics tests licensing, market conduct, fair treatment of customers, anti-money laundering, data privacy, and conflicts of interest.
Core rules
- Licensing and fit-and-proper: agents must be registered, competent, and honest; insurers must meet solvency and governance standards.
- Conduct standards: disclose product features, charges, and commissions; recommend suitable products; avoid mis-selling.
- Fair treatment: clear communication, complaints handling, prompt claims payment, and protection of vulnerable customers.
- AML/CFT: identify customers, monitor unusual transactions, keep records, and report suspicious activity to the financial intelligence unit.
- Privacy: collect only necessary data, secure it, and use it for disclosed purposes.
Worked example
A client offers an agent a $500 gift card to "make sure" a particular investment-linked policy is recommended. The agent should decline the gift or declare it under the firm's gifts policy, because it creates a conflict with the duty to recommend a suitable product. If the product is unsuitable, the agent must not recommend it even if the client insists. The reasoning is that conduct rules require the client's interests to prevail over the agent's personal gain, and undisclosed inducements can void the advice.
Traps
- Treating ethics as separate from enforceable conduct rules.
- Assuming a client's request removes the need for suitability analysis.
- Forgetting record-keeping and suspicious-transaction reporting.