Ethics and Conduct in Trading

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Questions and Answers

What is a primary responsibility of a trading member when providing investment advice to a client?

To avoid collecting client information.

To maximize the trading member's income.

To analyze the client's financial situation and objectives. (correct)

To provide advice regardless of the client's understanding.

Which action is NOT required of a trading member concerning client investment advice?

Ensuring the client understands the risks involved.

Seeking personal financial advice from the client.

Providing advice solely for income maximization. (correct)

Identifying suitable investments based on client needs.

What should a trading member do before making an investment decision?

Discuss personal investments with the client.

Take reasonable steps to seek client information. (correct)

Ignore the client's risk profile.

Only consider market trends.

Why is it important for a trading member to conduct an analysis of the client's information?

To provide tailored investment advice. Signup and view all the answers

In what way must a trading member ensure the investment advice is presented to the client?

In a way that the client can easily comprehend. Signup and view all the answers

What is required for any representations made to a client?

Representations must be factually correct. Signup and view all the answers

Which of the following must be included in the disclosure regarding monetary obligations?

Monetary amounts in specific terms. Signup and view all the answers

When is it necessary to duplicate or repeat disclosures to a client?

Only when material or significant changes occur. Signup and view all the answers

What must a trading member do regarding client confidentiality?

Obtain written consent before disclosing any confidential information. Signup and view all the answers

What is required for maintaining client records?

Records must be proper, complete, accurate, and secure. Signup and view all the answers

What is the minimum retention period for client instructions to execute transactions?

Six months Signup and view all the answers

What types of formats can client records be kept in?

Printed, electronic, or voice-recorded Signup and view all the answers

For how long must a trading member keep all other client records after services are rendered?

Five years Signup and view all the answers

Which of the following is NOT a function of a trading member in relation to client communications?

Inducing clients to waive their rights Signup and view all the answers

What is a requirement for a trading member regarding financial resources?

To maintain adequate financial resources Signup and view all the answers

Which of the following practices should a trading member actively employ?

Eliminate risk of client financial loss Signup and view all the answers

Which action regarding client waivers is considered valid for a trading member?

Neither request nor act on a waiver Signup and view all the answers

What must a trading member ensure about its staff?

Must have suitable qualifications and proper supervision Signup and view all the answers

What is required of a trading member in relation to the JSE as a regulator?

They should maintain a cooperative and open relationship with the JSE. Signup and view all the answers

What must a trading member do when they engage in unsolicited calls for transactions?

Ensure they have followed the IRC Rules. Signup and view all the answers

Which of the following is NOT a requirement for advertising by trading members?

Risk of loss should be downplayed. Signup and view all the answers

What responsibility does a trading member have towards its employees regarding the code?

The trading member must enforce the code's provisions on employees. Signup and view all the answers

When providing information in advertisements, which statement is acceptable for trading members?

Information must be unambiguous and factual. Signup and view all the answers

What is a key standard of integrity a trading member must adhere to?

Avoid transactions that have a dishonest motive Signup and view all the answers

Which action is prohibited regarding conflicts of interest?

Placing personal interests above client interests Signup and view all the answers

In how should a trading member act in relation to client instructions?

Act promptly and responsibly on client instructions Signup and view all the answers

What should a trading member avoid in terms of information provided to clients?

Making misleading forecasts Signup and view all the answers

What behaviour is expected regarding dealings with the media by a trading member?

Maintain respect for the JSE's dignity in all dealings Signup and view all the answers

Study Notes

Code of Conduct Overview

Trading members must demonstrate high integrity and fair dealing in all business interactions.
Acceptance of non-business inducements for business benefits is prohibited.
Providing false or misleading information that could impact IRC security prices is not allowed.
Engaging in market manipulation or facilitating dishonest transactions is strictly forbidden.
Activities must align with the objectives of the Act and uphold the dignity of the JSE.

General Client Conduct

Members must act honestly and fairly, maintaining due skill and diligence in client dealings.
Independent professional judgment is essential when serving clients.
Prompt response to client instructions with responsible discretion is required.
Conflicts of interest must be managed through disclosure, with client interests prioritized.

Investment Advice and Discretion

Trading members should gather comprehensive information about the client's financial situation and investment goals for effective advice.
A thorough analysis of client information is required to recommend suitable JSE authorized investments.
Clear and understandable communication of investment advice, including risks and terms, is necessary to empower client decision-making.
Advice must not be motivated solely by the trading member’s potential income.

Client Disclosure Obligations

All representations and information provided to clients must be factually correct and clearly articulated.
Financial amounts related to services must be disclosed in specific monetary terms whenever possible.
Confidential client information is protected unless client consent is obtained for disclosure.
Clients must be informed about any restrictions that may affect access to their funds or investments.

Record Keeping Requirements

Members must maintain safe, accurate, and complete records of all services rendered to clients.
Documentation includes communications, transactions, contracts, and relevant client particulars.
Records can be stored electronically, in print, or via voice recordings and must be available for inspection within seven days.
Transaction instructions must be kept for at least six months; other records for five years.

Client Contact and Communication

Adequate resources must be in place to ensure clients can easily contact the trading member for inquiries or issues.
Members are prohibited from inducing clients to waive rights or benefits under the code.

Financial Resource Management

Members must ensure sufficient financial resources are maintained to meet obligations and manage risks effectively.

Internal Risk Management Protocols

Trading members should implement comprehensive resources and procedures to prevent financial losses due to theft, fraud, or negligent practices.
Proper training and supervision of staff are essential for maintaining operational integrity.

Regulatory Cooperation

An open and cooperative relationship with the JSE is required, with a focus on timely information sharing regarding regulatory matters.
Reasonable support must be provided to law enforcement or regulatory agencies during investigations.

Employee Code Enforcement

The code's provisions must be enforced for all employees within the trading member's organization.

Unsolicited Calls Policy

Transactions resulting from unsolicited client calls are permissible if IRC Rules are followed.

Advertising Protocols

Advertising must convey accurate, complete information about investments and services, highlighting the risks of loss.
Ads must distinguish between fact and opinion and must not imply that trading derivative instruments is suitable for everyone.

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Description

This quiz tests your understanding of ethical standards and the code of conduct for trading members. Focused on integrity and fair dealing, it covers key principles that trading members must uphold. Ensure you are well-versed in maintaining high ethical standards in the trading landscape.