Ethics and Professional Standards
What this domain tests
This section tests the standards expected of an NZDX adviser beyond technical competence: integrity, client priority, disclosure and professional judgement.
The Code of Professional Conduct
The Code requires ethical behaviour, acting with care, diligence and skill, managing conflicts, protecting client information and maintaining competence. Ethical duties sit alongside legal duties; compliance with the minimum legal standard may still fall short of the Code.
Conflicts and inducements
Gifts, hospitality and issuer-paid trips can create conflicts. The test is whether the benefit could influence advice and whether the client would expect it. Disclosure and, where necessary, refusal are the controls. Confidential client information must not be used for personal advantage.
Worked example
An adviser is invited by a bond issuer to an overseas sporting event shortly before a new offer. The invitation is valuable and could reasonably be seen as influencing the adviser's recommendation. The adviser should disclose the invitation to the firm and client, and decline or manage it under the conflicts policy. Recommending the bond without disclosure would breach the Code even if the bond were suitable.
Traps that cost marks
Equating legality with ethical conduct; accepting hospitality without disclosure; using client information for personal trading; and assuming a suitable product cures an undisclosed conflict.