Trading Standards and Integrity Quiz

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Questions and Answers

What is a requirement for the representations made to clients by a trading member?

They can be vague if the client is inexperienced.

They must include all potential future investments.

They must be provided only in sophisticated language.

They must be factually correct. (correct)

Which of the following statements is true regarding the disclosure of fees to clients?

All disclosed amounts must reflect specific monetary terms. (correct)

Only total fees are required to be disclosed without itemization.

Fees do not require prior disclosure if already discussed in previous conversations.

Fees can be disclosed in generalized terms without specifics.

When may a trading member disclose confidential information obtained from a client?

Whenever it is beneficial for the trading member.

Only with the written consent of the client or if required by law. (correct)

If the information is outdated and no longer sensitive.

When the client expresses concerns about their investment.

Under what circumstances must a trading member repeat disclosures to the same client?

If there are material or significant changes that affect the client. Signup and view all the answers

What standard must the maintenance of client records meet according to the guidelines for trading members?

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

Which action is permissible under the standards of integrity for trading members?

Acting in accordance with a client's discretion while ensuring fair treatment Signup and view all the answers

What should a trading member avoid to maintain ethical conduct?

Submitting misrepresentative information to the JSE Signup and view all the answers

In terms of client dealings, which behavior reflects poor ethical standards?

Making optimistic forecasts without basis Signup and view all the answers

What constitutes a breach of conduct regarding conflicts of interest?

Prioritizing one's own interests over those of a client Signup and view all the answers

Which of the following actions would likely discredit the JSE?

Facilitating transactions without a clear business motive Signup and view all the answers

What is a requirement for a trading member when entering into a transaction as a result of an unsolicited call?

They must comply with the IRC Rules. Signup and view all the answers

Which of the following statements regarding the enforcement of the code on employees is true?

All employees of a trading member must be subject to the code's provisions. Signup and view all the answers

What aspect must advertising material of a trading member emphasize?

The risk of loss and uncertainty of future results. Signup and view all the answers

When dealing with the JSE, how must a trading member approach communication?

In an open, co-operative manner and promptly inform of relevant issues. Signup and view all the answers

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

Advertisements may suggest that derivatives are suitable for everyone. Signup and view all the answers

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

Six months Signup and view all the answers

Which of the following statements is true regarding client record retention?

All client records must be stored for at least five years after the service rendering Signup and view all the answers

What is the primary reason for a trading member maintaining adequate financial resources?

To meet business commitments and withstand risks Signup and view all the answers

How soon must a trading member be capable of making client records available for inspection?

Within seven days Signup and view all the answers

What action is prohibited regarding client rights by a trading member?

Inducing a client to waive rights Signup and view all the answers

What must a trading member ensure regarding its internal affairs and risk management?

They must mitigate the risk of client financial loss Signup and view all the answers

In what formats can client records be kept by a trading member?

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

What must be the qualification status of the staff at a trading member?

They must be suitable and adequately trained Signup and view all the answers

What must an advertisement include if it contains performance data?

References to their source and date. Signup and view all the answers

Which of the following statements must be prominently displayed in an advertisement?

A warning statement about risks involved in buying or selling a JSE authorized investment. Signup and view all the answers

What is a requirement for forecasts and hypothetical data in an advertisement?

They should clearly state basic assumptions with reasonable prospects. Signup and view all the answers

What should be included when advertising past performance?

A warning that past performances are not necessarily indicative of future performances. Signup and view all the answers

What consequence may occur if a trading member does not conform to advertising requirements?

The trading member may have to submit all future advertising for approval. Signup and view all the answers

Which of the following conditions pertains to the guarantees of investment values mentioned in advertisements?

A warning must be included if the investment value is not guaranteed. Signup and view all the answers

What must be reported by trading members to the JSE?

Contraventions of the Act and advertising rules. Signup and view all the answers

What does a clear indication of dependency in advertisements specify?

It highlights that performance is dependent on variable market factors. Signup and view all the answers

Study Notes

Standards of Integrity

Trading members must uphold high standards of integrity and fair dealing in their business practices.
They are prohibited from offering or accepting material inducements, especially those of a non-business nature, to secure business.
Trading members cannot knowingly disseminate or submit false or misleading information to the JSE or JSE Clear that could unfairly impact the price of any IRC security.
Market manipulation or influencing individuals for such purposes is strictly prohibited.
Engaging in fictitious transactions or those with dishonest or unlawful motives is forbidden.
Trading members must conduct their activities in a manner that aligns with the Act's objectives and respects the dignity of the JSE.
They must refrain from participating in dealings with other trading members, clients, media, and other individuals that could discredit the JSE.

General Conduct towards Clients

Trading members must act honestly and fairly in their dealings with clients.
They are obligated to act with due skill, care, diligence, and prioritize their client's interests.
Independent professional judgment must be exercised by trading members.
Prompt action on client instructions is necessary, and any discretionary powers must be exercised responsibly.
Conflicts of interest must be avoided. If unavoidable, they must ensure fair treatment of clients through disclosure, confidentiality, or declining to act.
Trading members cannot prioritize their interests over those of their clients.
They must avoid making misleading statements, promises, or forecasts that could induce clients to enter into agreements.

Disclosure to Clients

Trading members must ensure all representations made and information provided to clients is factually accurate and presented in plain, unambiguous language.
The information must be adequate and appropriate based on the client's level of knowledge.
Monetary amounts, charges, fees, remuneration, or obligations must be clearly stated. When not readily pre-determinable, their basis of calculation must be adequately described.
Information must be disclosed to clients when material or significant changes occur.
Trading members are required to provide full and accurate information on fees and other charges levied on clients.
Confidential client information must not be disclosed without written consent or when required for legal or regulatory purposes.
Clients must be notified of any restrictions or limitations affecting access to their funds or authorized investments.

Maintenance of Client Records

Trading members must maintain accurate, complete, and secure records of all client services.
Proper procedures and systems must be in place to store and retrieve these records securely.
Records should include communication related to services, client instructions, transaction documentation, contractual arrangements, and client particulars.
Records can be in printed, electronic, or voice-recorded format.
While records need not be kept on-site, they must be accessible for inspection within seven days.
Client instructions for transactions must be retained for at least six months, and other client records must be kept for at least five years.

Contact with the Trading Member

Trading members must provide accessible communication channels for their clients to contact them.

Waiver of Rights

Trading members are prohibited from requesting or inducing clients to waive any rights or benefits granted by this code or related rules.
Such waivers are considered void.

Adequacy of Financial Resources

Trading members are required to maintain sufficient financial resources to cover their business commitments and withstand associated risks.

Internal Resources and Risk Management

Trading members must employ adequate resources and procedures to ensure the proper performance of their business activities.
They are responsible for minimizing risks to clients from theft, fraud, poor administration, negligence, misconduct, or omissions.
Internal affairs must be organized and controlled effectively, maintaining accurate records.
Staff must be suitable, adequately trained, and properly supervised.

Co-operation with Regulators

Trading members must cooperate openly with the JSE as their regulator, promptly informing them of any relevant information.
They must also cooperate with other regulatory bodies and law enforcement agencies in investigations related to potential violations of the Act or other relevant laws.

Enforcement of Code on Employees

Trading members must enforce the provisions of this code on all their employees.

Unsolicited Calls

Transactions resulting from unsolicited calls are allowed but must comply with the requirements of the IRC Rules.

Advertising by Trading Members

Advertising by trading members must provide accurate, complete, and unambiguous information about JSE-authorized investments and offered services.
They must emphasize the risks, uncertainties, and lack of guarantees associated with investments.
Advertising must clearly distinguish between facts and opinions.
It cannot be comparative in relation to other trading members.
It must avoid suggesting that derivative instruments on the JSE are suitable for all individuals.
Advertisements cannot contain fraudulent, untrue, or misleading statements, promises, or forecasts.
Performance data, including awards and rankings, must include their source and date.
Illustrations, forecasts, or hypothetical data must be supported by clearly stated assumptions and be presented clearly as non-guaranteed and for illustrative purposes only.
Advertisements should include warnings about the risks involved in buying or selling JSE-authorized investments, as well as warnings that past performances are not guarantees of future results.
In cases where the investment value of a JSE-authorized investment mentioned in the advertisement is not guaranteed, a warning statement must be included.
If the JSE believes a trading member violates advertising requirements, it may require them to submit advertising materials for review before publication.

Contraventions to be Reported

All trading members are required to report any contraventions of the Act, these rules, or directives to the JSE.

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Description

Test your knowledge on the essential standards of integrity and conduct expected from trading members. This quiz focuses on fair dealing, prohibition of inducements, and the ethical responsibilities towards clients and the JSE. See how well you understand the importance of maintaining a reputable trading environment.