2 Ethics, Behavioural Standards and Professional Conduct
This chapter treats personal conduct as part of market infrastructure. The central exam habit is to identify the conflict or customer risk, apply the control, disclose or escalate, and preserve evidence.
2.1 Introduction
Section titled “2.1 Introduction”Ethics is a control system as well as a personal value. A technically correct trade can still be unacceptable if it involves deception, undisclosed conflict, misuse of information, unfair customer treatment or a failure to escalate concerns.
2.2 Fit and Proper Guidelines and Disclosure Requirements
Section titled “2.2 Fit and Proper Guidelines and Disclosure Requirements”Fit-and-proper assessment covers honesty, integrity, reputation, competence, capability and financial soundness. Representatives and institutions must disclose material changes and maintain evidence supporting their continuing suitability.
2.2.1 Honesty, Integrity, Reputation
Section titled “2.2.1 Honesty, Integrity, Reputation”Past misconduct, dishonesty, regulatory breaches, criminal conduct or misleading disclosures can affect fitness. The assessment considers seriousness, relevance, recency, repetition, remediation and the person’s candour.
2.2.2 Competency and Capability
Section titled “2.2.2 Competency and Capability”A representative must have the knowledge, skills, experience, supervision and resources needed for the activity. Passing an examination alone does not justify dealing beyond one’s competence or authority.
2.2.3 Financial Soundness
Section titled “2.2.3 Financial Soundness”Financial distress, insolvency, unmanaged debt or conflicts created by personal financial pressure can impair judgement and increase conduct risk. Relevant information must be disclosed and assessed under the applicable guidelines.
2.2.4 Change of Particulars and Additional Regulated Activity
Section titled “2.2.4 Change of Particulars and Additional Regulated Activity”Changes in personal particulars, employment, role, responsibility or regulated activity must be reported through the prescribed process. A person should not begin a new regulated activity before the required approval, notification, training or licensing step is complete.
2.3 Conflicts of Interest and Ethical Standards
Section titled “2.3 Conflicts of Interest and Ethical Standards”Conflicts must be identified, avoided where possible, controlled and disclosed where necessary. The client’s or market’s interest cannot be subordinated to a representative’s compensation, relationship, personal position or convenience.
2.3.1 Acting for Only One Principal
Section titled “2.3.1 Acting for Only One Principal”A representative should act for the principal for whom he or she is authorised and must not secretly serve competing principals or use one principal’s confidential information for another. Dual roles require explicit authorisation and controls.
2.3.2 Personal Relationships
Section titled “2.3.2 Personal Relationships”Family, friendship and other close relationships can create actual or perceived conflicts. The proper response is disclosure, recusal, reassignment or another documented control, not informal concealment.
2.3.3 Entertainment, Gifts and Favours
Section titled “2.3.3 Entertainment, Gifts and Favours”Gifts, hospitality and favours must be reasonable, transparent, permitted by policy and incapable of influencing business judgement. Excessive or secret benefits can be inducements or corruption risks.
2.3.4 Personal Dealing
Section titled “2.3.4 Personal Dealing”Personal trades require compliance with dealing restrictions, pre-clearance where required, disclosure of accounts and protection of customer orders. Representatives must not trade ahead of customers, misuse information or create a conflict with their professional role.
2.3.5 Disclosure of Interests
Section titled “2.3.5 Disclosure of Interests”A representative should disclose relevant ownership, financial interests, relationships and other conflicts so the firm can assess and manage them. Disclosure is not a licence to proceed without controls.
2.3.6 Bets and Gambling
Section titled “2.3.6 Bets and Gambling”Gambling and betting can impair judgement, create financial pressure or undermine confidence in a representative. Policies and fit-and-proper standards may require restrictions, disclosure or escalation.
2.3.7 Promotion of Ethical Practices, Values and Conduct
Section titled “2.3.7 Promotion of Ethical Practices, Values and Conduct”Management should set a tone of integrity, train staff, reward sound conduct, monitor behaviour and make escalation safe. Ethical culture is evidenced by decisions and controls, not by a policy statement alone.
2.4 Professional Knowledge
Section titled “2.4 Professional Knowledge”Professional knowledge includes products, conventions, laws, codes, risk, systems and the limits of one’s authority. Ongoing learning is necessary because market conventions, technology and regulation change.
2.5 Dealings with Customers
Section titled “2.5 Dealings with Customers”Customer dealings must be fair, clear, timely and consistent with the agreed mandate. Representatives should explain material risks, disclose principal capacity, safeguard customer money and assets and avoid misleading omissions.
2.5.1 Risk Disclosure
Section titled “2.5.1 Risk Disclosure”Required risk disclosures should be provided before the relevant activity, in a form the customer can understand. A risk disclosure is not effective if it is hidden, inaccurate or contradicted by the representative’s explanation.
2.5.2 Managed Account Disclosures
Section titled “2.5.2 Managed Account Disclosures”Managed-account customers need clear information about the mandate, discretion, fees, risks, valuation and reporting. The representative must operate within the mandate and disclose material changes or conflicts.
2.5.3 Dealing as Principal
Section titled “2.5.3 Dealing as Principal”When a market participant deals as principal, it is the customer’s counterparty rather than merely an agent. The capacity, price basis, conflicts and relevant terms should be made clear before the trade.
2.5.4 Customer Money and Assets
Section titled “2.5.4 Customer Money and Assets”Customer money and assets must be held, recorded and used only as permitted. They cannot be diverted for the firm’s convenience or another customer’s benefit, and reconciliations and segregation controls are essential.
2.6 Reporting of Misconduct
Section titled “2.6 Reporting of Misconduct”Suspected misconduct should be recorded, escalated through approved channels and reported to MAS where the applicable notice requires a report. Staff should not investigate in a way that compromises evidence or alert a subject improperly.
Exam cues
Section titled “Exam cues”- Fit-and-proper test: honesty, integrity and reputation; competence and capability; financial soundness. Consider seriousness, relevance, recency, repetition and candour.
- Conflicts: identify → avoid → control → disclose; never serve competing principals, use one principal’s information for another, or act on undisclosed personal interests.
- Customer dealings: explain material risks before the activity, in a form the customer understands; disclose when dealing as principal (the customer’s counterparty) versus agent.
- Customer money and assets: hold, record and use only as permitted; segregation and reconciliation are essential.
- Reporting misconduct: escalate through approved channels and report to MAS where a notice requires it.
- Trap: a risk disclosure hidden, inaccurate or contradicted by the representative’s explanation is not effective.