C4 Professional Ethics & Standards 3 — Questions and Answers
Question 1: A C4 professional posts bullish price predictions for a token on social media without disclosing they were paid to do so. This violates which ethical principle?
- Diligence
- Transparency and disclosure (Correct answer)
- Loyalty to employer
- Continuing education
Correct answer: Transparency and disclosure
Paid promotions must be disclosed; failure to do so violates transparency principles and potentially SEC/FTC regulations.
Question 2: What is the C4 professional's obligation when they discover a material error in a client report that has already been delivered?
- Wait until the next reporting period to correct it
- Promptly notify the client and issue a corrected report (Correct answer)
- Correct it silently in the next report without notification
- Only correct it if the client notices and complains
Correct answer: Promptly notify the client and issue a corrected report
Prompt correction and notification of material errors is required to maintain professional integrity and client trust.
Question 3: Under ethical standards for crypto professionals, 'suitability' primarily means:
- Recommending only the most profitable assets
- Ensuring recommendations align with the client's risk tolerance, goals, and financial situation (Correct answer)
- Only advising clients who pass a literacy test
- Matching client portfolios to market benchmarks
Correct answer: Ensuring recommendations align with the client's risk tolerance, goals, and financial situation
Suitability requires that any recommendation be appropriate for the specific client's individual circumstances, not just the professional's opinion.
Question 4: A crypto exchange employee learns about an upcoming large institutional buy order before it is executed. Trading on this information personally would constitute:
- Arbitrage
- Front-running, which is an ethical and legal violation (Correct answer)
- Hedging
- Dollar-cost averaging
Correct answer: Front-running, which is an ethical and legal violation
Front-running — trading ahead of known client orders for personal gain — is market manipulation and a serious fiduciary breach.
Question 5: Which C4 ethical principle requires professionals to maintain and improve their knowledge of cryptocurrency markets and regulations?
- Confidentiality
- Non-malfeasance
- Competence through continuing education (Correct answer)
- Independence
Correct answer: Competence through continuing education
The principle of competence obligates certified professionals to maintain current knowledge through ongoing education given the rapidly evolving crypto landscape.
Question 6: A professional is pressured by their manager to omit risk disclosures from client materials to increase sales. The ethical action is to:
- Comply to maintain employment
- Refuse and escalate to compliance, legal, or a regulatory body if needed (Correct answer)
- Include the disclosures in fine print so they are technically present
- Ask the client if they want the disclosures included
Correct answer: Refuse and escalate to compliance, legal, or a regulatory body if needed
Omitting material risk disclosures harms clients; professionals must refuse unethical directives and escalate through appropriate channels.
Question 7: When is it permissible under C4 ethics to share client portfolio details with a third party?
- When the client is a high-net-worth individual
- When the client provides explicit informed consent or when required by law (Correct answer)
- When it would benefit the client financially
- When the third party is also a C4 certified professional
Correct answer: When the client provides explicit informed consent or when required by law
Client confidentiality may only be broken with explicit consent or under valid legal compulsion such as a court order or regulatory requirement.
C4 Professional Ethics & Standards 3
A C4 professional posts bullish price predictions for a token on social media without disclosing they were paid to do so.
This violates which ethical principle?