Ethics questions can be very confusing as they may include or exclude information. Information may also be misleading, intended to throw you off the right track. One of the traps is a situation where multiple violations occur. Here is an example:

"John Williams, a portfolio manager, directs his clients' trades towards a brokerage that charges higher commissions, by as much as 50%. However, it has agreed to pay for John's trip to an international trade conference."

In this simple statement, there are several hidden mines. A candidate should ask the following questions:

1. Did John consult his supervisor before accepting this offer in exchange for higher commission trades?
2. Since a client's brokerage commission is the client's property, was it used to benefit the client directly?
3. Did John get the best price and execution for the clients' trades?
4. Did John reveal the conflict of interest to his clients, i.e., their brokerage was going towards paying for his trip and it may only have a tangential benefit to the client at best?
5. Did John compromise his independence and objectivity by accepting the expense paid trip?

The following standards are potentially violated under this simple statement:

1. Standard III C - Disclosure of Conflicts to Employers
2. Standard IV (A.3) - Independence and Objectivity
3. Standard IV (B.1) - Fiduciary Duty to Clients
4. Standard IV (B.7) - Disclosure of Conflicts to Clients and Prospects
5. Standard III E - Responsibilities of Supervisors, may also have been violated by John's supervisor if there is no policy in place for such offers from third parties. A supervisor's responsibility includes anticipation of violations and their prevention - a proactive role, required for compliance with this standard.

Get a FREE Download of an Ethics Summary File, that is a handy tool for quick reference.