Ethical Standards & Professional Conduct Flashcards
7 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethical Standards & Professional Conduct flashcards as text
A CES professional serves as trustee and also receives commissions from insurance products sold to the trust. This arrangement MOST likely violates which duty?
Answer: Duty to avoid conflicts of interest
Receiving undisclosed commissions on products sold to a trust one administers is a classic conflict of interest that violates fiduciary duty.
When a CES professional is uncertain whether a client action is legal, the BEST course of action is to:
Answer: Seek legal counsel or refer the matter to an attorney before proceeding
When legal uncertainty arises, CES professionals must seek qualified legal guidance before taking action to avoid facilitating potential violations.
Which standard requires a CES professional to keep accurate and complete records of all trust transactions?
Answer: Duty to account
The duty to account requires trustees and fiduciaries to maintain complete, accurate records and provide periodic accountings to beneficiaries.
A beneficiary requests copies of all trust investment records. A CES professional acting as trustee should GENERALLY:
Answer: Provide the requested information unless a valid legal basis exists to withhold it
Beneficiaries are generally entitled to trust information, and a trustee must provide it unless a specific legal provision or court order justifies withholding.
What does the prudent investor rule primarily govern for a CES trustee?
Answer: The standard of care applied to investment decisions for trust assets
The prudent investor rule requires trustees to invest trust assets with the care, skill, and caution of a prudent investor, considering risk and return in the context of the whole portfolio.
A CES professional learns that a client intends to use a trust structure to defraud creditors. The professional's ethical obligation is to:
Answer: Refuse to participate and, if necessary, withdraw from the engagement
Facilitating fraudulent transfers or creditor fraud violates legal and ethical standards; the professional must refuse and withdraw rather than assist.
In estate and trust practice, 'surcharge' refers to:
Answer: A penalty imposed on a trustee personally for breach of fiduciary duty causing loss
A surcharge is the personal financial liability imposed on a trustee who breaches fiduciary duty, requiring them to make the trust whole for any resulting loss.