Ethics, Governance and Regulation
Duties and standards
Know fiduciary duty, the duties of loyalty and care, independence and objectivity, and the priority of client interests over personal or employer interests. Cover confidentiality, suitability, fair dealing, best execution, conflicts-of-interest disclosure, and the handling of gifts and entertainment. On material nonpublic information (MNPI), the mosaic theory permits combining public information with non-material nonpublic information; trading or tipping on MNPI is prohibited.
Market integrity and regulation
Prohibit manipulation (wash trades, spoofing, marking the close), insider dealing, front-running and misrepresentation. Understand the roles of regulators and self-regulatory bodies, know-your-client and anti-money-laundering obligations, record keeping, and performance presentation standards such as GIPS. Model risk governance, ESG disclosure and proxy voting are increasingly examinable.
Traps
- Assuming disclosure alone cures a conflict; avoidance or recusal is sometimes required.
- Treating "everyone does it" or client consent as a defence to manipulation.
- Acting on nonpublic information that is not price-sensitive, or ignoring the breach-of-duty element.
- Cherry-picking performance or showing gross returns without required disclosures.
- Accepting lavish gifts or entertainment that compromise independence.
Worked example
An analyst learns from a supplier that a company's order book has collapsed. The information is nonpublic and material, so trading or tipping is prohibited. If instead the analyst infers weak demand from public shipping data and industry commentary, that is legitimate mosaic analysis. Test each case: is the information public, material, and obtained in breach of a duty?