Ethics, Fiduciary Duties, and Unfair Trade Practices
What the exam tests
Ethics, Fiduciary Duties, and Unfair Trade Practices tests fiduciary duties and fair-dealing rules: loyalty, disclosure, accounting, confidentiality, and avoidance of deceptive practices such as shill bidding, bid rigging, and misleading statements.
Core rules
- Fiduciary duties include loyalty, obedience to lawful instructions, reasonable care, confidentiality, and accounting. The auctioneer must put the principal's interests above the auctioneer's own.
- Disclose conflicts: dual agency, ownership in goods, commissions from both sides, family relationships with bidders, and any interest in a lot. Obtain informed consent where required.
- Do not shill: no undisclosed bidder acting to drive up price, no phantom online bids, no bid suppression or collusion. Under UCC 2-328, undisclosed seller bidding can let the buyer avoid the sale.
- Advertising and statements must be truthful. Puffery is not a license for material misrepresentation about ownership, condition, reserve, or buyer's premium.
- Protect confidential reserve and seller information unless disclosure is authorized.
Worked example
An auctioneer asks a friend to bid on a lot to 'get the room going,' with no intention that the friend will buy. The friend is a shill. The conduct misleads bidders, may allow the buyer to avoid the sale, and supports license discipline. If the auctioneer instead discloses that the seller reserves the right to bid, the rule changes: notice can permit seller bidding, but the disclosure must be clear and timely.
Traps
Do not confuse sales puffery with a false statement of fact. Do not bid on your own auction without disclosure and authority. Do not reveal a confidential reserve to a favored bidder. Do not treat 'everyone does it' as a defense.