Ethical Standards & Professional Conduct Flashcards

A CES professional learns through estate work that a client is conducting an undisclosed tax fraud scheme unrelated to the estate. The professional's BEST course of action is to:

Answer: Consult legal counsel about disclosure obligations and consider withdrawing if continuing would facilitate the fraud

The professional should consult legal counsel regarding reporting obligations and evaluate whether continued representation would facilitate the illegal conduct, potentially requiring withdrawal.

Which of the following BEST describes the concept of 'no further inquiry' rule in trust law?

Answer: When a transaction involves a trustee's personal interest, it is presumed voidable without needing to prove actual harm

The 'no further inquiry' rule holds that self-dealing transactions by a trustee are presumptively voidable and do not require the plaintiff to prove actual damage.

A CES professional advertising their services must ensure that all marketing materials are:

Answer: Truthful, not misleading, and compliant with applicable professional advertising standards

Professional advertising must be truthful, non-deceptive, and compliant with relevant professional conduct rules to prevent the public from being misled.

A CES professional who delegates investment management to a third-party manager retains which ongoing obligation?

Answer: The duty to monitor the delegate's performance and replace them if they are not fulfilling their responsibilities

Delegation does not eliminate fiduciary responsibility; the trustee must establish prudent selection criteria and continue to monitor the delegate's ongoing performance.

When a trust beneficiary raises a formal complaint about a CES professional's conduct, the professional should FIRST:

Answer: Preserve all relevant records, consult professional liability counsel, and respond through proper channels

Upon receiving a formal complaint, the professional must preserve records, seek legal guidance, and respond through appropriate professional or legal channels without retaliating.

A CES professional is asked to serve as both the drafter of a trust and as its trustee. Which ethical concern is MOST significant?

Answer: The dual role creates potential conflicts between the professional's drafting choices and their later trustee discretion

Drafting a trust and then administering it as trustee creates a potential conflict because the drafter may have built in provisions that expand their own discretion or compensation.

Which of the following scenarios BEST demonstrates a CES professional maintaining independence and objectivity?

Answer: Basing all recommendations on the client's goals and risk tolerance without regard to personal benefit

Independence and objectivity require that all professional recommendations be driven by the client's best interests and circumstances, free from personal or financial bias.