CDG Industry Ethics & Market Knowledge 3 — Questions and Answers
Question 1: The FTC requires that diamonds described as 'lab-grown' or 'synthetic' must be:
- Accompanied by a natural diamond disclosure waiver
- Clearly distinguished from natural diamonds in marketing and labeling (Correct answer)
- Sold only through specialty retailers, not general jewelers
- Priced within 20% of comparable natural diamonds
Correct answer: Clearly distinguished from natural diamonds in marketing and labeling
FTC guidelines mandate that lab-grown diamonds be clearly identified to prevent consumer deception.
Question 2: A secondary diamond market is most accurately defined as:
- Wholesale transactions between mining companies and cutters
- Retail sales of new jewelry in developing markets
- Resale of previously owned or estate diamonds (Correct answer)
- Import/export of rough diamonds across national borders
Correct answer: Resale of previously owned or estate diamonds
The secondary market encompasses resale of previously owned diamonds through estate sales, auctions, and pawn transactions.
Question 3: A diamond grader who accepts gifts from clients in exchange for favorable grades is violating which core ethical principle?
- Transparency
- Competence
- Independence (Correct answer)
- Confidentiality
Correct answer: Independence
Accepting gifts that influence grading outcomes compromises professional independence and objectivity.
Question 4: De Beers historically maintained high diamond prices primarily through:
- Government subsidies to diamond-producing nations
- Controlling the supply of rough diamonds entering the market (Correct answer)
- Imposing import tariffs on foreign-cut diamonds
- Patenting the round brilliant cut exclusively
Correct answer: Controlling the supply of rough diamonds entering the market
De Beers controlled a dominant share of rough diamond supply for decades, restricting flow to maintain pricing stability.
Question 5: When appraising a diamond for insurance replacement value, the standard is typically:
- Wholesale cost to the insured
- The price a willing buyer would pay a willing seller in an open market
- Retail replacement cost for a comparable stone (Correct answer)
- Original purchase price adjusted for inflation
Correct answer: Retail replacement cost for a comparable stone
Insurance replacement value represents what it would cost to replace the item with a comparable one at current retail prices.
Question 6: Under the ethical standards of most gemological associations, a conflict of interest in diamond appraisal arises when:
- The appraiser and client are in the same city
- The appraiser has a financial stake in the outcome of the valuation (Correct answer)
- The stone being appraised is worth more than $10,000
- The appraiser is not a member of the selling dealer's trade association
Correct answer: The appraiser has a financial stake in the outcome of the valuation
A financial interest in the outcome (e.g., commission based on appraised value) creates a conflict of interest that must be disclosed or avoided.
Question 7: The Rapaport Diamond Report is used within the diamond trade primarily as:
- A certification standard for ethical sourcing
- A wholesale price benchmark based on cut, color, and clarity (Correct answer)
- A regulatory filing required for import licenses
- An insurance valuation guide accepted by underwriters
Correct answer: A wholesale price benchmark based on cut, color, and clarity
The Rapaport Price List provides a widely referenced benchmark for wholesale diamond pricing by grade and size.
CDG Industry Ethics & Market Knowledge 3
The FTC requires that diamonds described as 'lab-grown' or 'synthetic' must be: