Professional ethics and conflicts of interest
What this domain tests
Ethics and conflicts test judgment: whether you can identify, disclose, manage, or avoid conflicts, and whether your personal conduct supports market integrity.
Core rules and concepts
Dealers must act honestly, professionally, and in the client's best interests. Conflicts of interest must be identified and managed: personal account dealing, gifts and hospitality, outside business interests, referral arrangements, and proprietary trading against client flow. Disclosure is not always enough; some conflicts must be avoided or controlled by information barriers, pre-clearance, restricted lists, or independent review. Confidential client information must not be misused. Gifts must be recorded and proportionate.
Worked example
A dealer is allocated shares in a hot IPO and wants to allocate some to a personal account before filling client orders. This is a conflict and a conduct breach. The correct approach is to apply the firm's allocation policy, pre-clear any personal dealing, and prioritise client orders. The reasoning is that the dealer has a duty to avoid exploiting client flow for personal gain.
Traps
Thinking disclosure alone cures every conflict. Treating a small gift as automatically acceptable without recording it. Using client information for personal trading. Assuming everyone does it is an ethical defence.