Integrity

The exam’s favorite “tell” is a vignette that looks like a client-relationship problem but is really a market problem. When the harm flows to the marketplace — a tipped trade on an unannounced merger, a layered order book, a planted rumor to move price — the answer hinges on Standard II (Integrity of Capital Markets), not the duties to clients (Standard III) or to employers (Standard IV). A reliable trap: candidates pick “Loyalty to Clients” because a client benefited, but who profited never decides the standard — what was distorted does. Don’t over-think materiality: II(A) defines material info by the reasonable-investor / price-impact test, and trading on it is barred regardless. The clean carve-out is the mosaic theory — public plus nonmaterial nonpublic information is permitted.

Don’t confuse this Standard II “Integrity” with Misconduct (I(D)), which polices the member’s own honesty and reputation (fraud, criminal acts), or with Independence and Objectivity (I(B)), which guards objectivity against gifts and pressure — both sit under Standard I (Professionalism). Memory hook: I-standards protect the professional; II protects the price.