3 Confidentiality and Information Sharing
Distinguishing useful market colour from protected information. The examination tests what is confidential, when disclosure is allowed and what must never be used as colour.
3.1 Introduction
Section titled “3.1 Introduction”Confidentiality protects customers, counterparties, the firm and the integrity of price formation. The relevant question is not simply whether information is interesting, but whether it identifies a party, order, position, strategy or protected business fact.
3.2 Identify and Limit Access to Confidential Information
Section titled “3.2 Identify and Limit Access to Confidential Information”Firms should classify confidential information, limit access on a need-to-know basis, maintain information barriers and protect physical and electronic records. Anonymity can be lost through seemingly harmless combinations of facts.
3.2.1 Identify Confidential Information
Section titled “3.2.1 Identify Confidential Information”Names, order details, positions, pricing matrices, client strategies and information that can identify a customer or counterparty are confidential. Publicly observable general market information is different from protected customer-specific information.
3.2.2 Limit Access and Protect Confidential Information
Section titled “3.2.2 Limit Access and Protect Confidential Information”Access should be role-based, monitored and removed when no longer needed. Encryption, secure channels, clean-desk practices, access reviews and controlled information barriers reduce accidental or deliberate disclosure.
3.3 Disclosure of Confidential Information
Section titled “3.3 Disclosure of Confidential Information”Disclosure requires a legal, regulatory, contractual or legitimate business basis. A representative should disclose only what is necessary, to the right recipient, through an approved channel and with appropriate records.
3.3.1 Allowable Disclosures
Section titled “3.3.1 Allowable Disclosures”Allowable disclosures may include those required by law, regulators, courts, law-enforcement processes or a permitted business purpose. A request from another market participant is not, by itself, authority to disclose.
3.3.2 Prudence before Disclosure
Section titled “3.3.2 Prudence before Disclosure”Before disclosing, confirm the recipient, authority, scope and sensitivity. When uncertain, pause and consult compliance or legal; do not invent a misleading answer merely to avoid giving the information.
3.4 Communication Practices
Section titled “3.4 Communication Practices”Market communication must be clear, accurate, professional and not misleading. Records should allow the firm to reconstruct what was said, to whom, when, through which channel and with what authority.
3.4.1 Clear, Accurate, Professional, Not Misleading
Section titled “3.4.1 Clear, Accurate, Professional, Not Misleading”A representative must not make false statements, create a misleading impression, hide a material qualification or present opinion as fact. Partial execution and uncertainty should be explained accurately without revealing protected information.
3.4.2 Market Colour Appropriately
Section titled “3.4.2 Market Colour Appropriately”Market colour can describe general liquidity, flow, direction, volatility or execution conditions without identifying a customer or a specific order. Customer names, exact amounts and traceable order details must not be used as colour.
3.4.3 Approved Communication Modes/Channels
Section titled “3.4.3 Approved Communication Modes/Channels”Use approved recorded channels and systems for dealing and material instructions. Personal messaging, unapproved devices and informal channels create evidential, surveillance and confidentiality risk.
3.5 Training
Section titled “3.5 Training”Training should cover confidentiality, anonymity, communication, escalation and practical scenarios. It should be refreshed and evidenced, with heightened training for staff who access sensitive information.
Exam cues
Section titled “Exam cues”- The answer is rarely “say nothing” or “tell everyone”: it is a precise, minimum-necessary and authorised communication.
- Allowable disclosures: law, regulators, courts, law enforcement or a permitted business purpose. A peer’s request is not authority.
- Market colour describes general conditions without identifying a customer or order — no names, exact amounts or traceable details.
- Channels: use approved, recorded platforms; personal messaging creates evidential and surveillance risk.
- Trap: a misleading answer invented to avoid disclosing information is itself a breach — pause and consult compliance instead.