CIRE · Element 9
CIRE Element 9: conflicts of interest and ethics
Element 9 accounts for about 16 of the CIRE's 110 questions. How conflicts of interest are managed, what you can't do with clients' money, and three questions to test yourself.
Element 9 accounts for about 16 of the CIRE's 110 questions, under the syllabus's indicative weighting. Its title is Conflicts of interest and ethics. It asks what an investment dealer and its people must do when their own interests could get in the way of the client's.
Where do you stand on Element 9? The free CIRE diagnostic gives you an indication of your strengths and the areas to review, element by element.
What the exam tests
According to the exam syllabus, you need to understand:
- why an investment dealer must manage conflicts of interest, and how;
- a dealer's ethical and legal responsibilities to clients;
- the importance of ethics and how it relates to the rules;
- CIRO's standards of conduct and other ethical standards;
- personal financial dealings with clients that are inappropriate or prohibited;
- the requirements for positions of influence;
- the requirements for an Approved Person's activities outside the dealer;
- client confidentiality, information control and cybersecurity.
Source: CIRE syllabus (CIRO, January 2025), learning outcomes 9.1 to 9.12.
The key ideas, in plain English
1. What is a conflict of interest?
A conflict of interest exists when the interests of the dealer or one of its representatives differ from the client's. Some simple examples:
- a higher commission on one product than on another;
- the dealer's own (proprietary) products;
- a gift from a client or from an issuer;
- a second job or a board seat.
A conflict isn't a breach in itself. Failing to manage a material one is. Left unmanaged, a conflict can lead people to put their own interests ahead of the client's.
2. Managing a conflict: four duties
The rules target material conflicts, existing or reasonably foreseeable. The dealer and its representatives must:
- Identify them. A representative reports a conflict to the dealer promptly.
- Address each one in the client's best interest, for example through controls.
- Avoid it if it can't be addressed in the client's best interest.
- Disclose it. The dealer discloses it to the client in writing when a reasonable client would expect to be informed, describing its nature and extent, its potential impact and risk, and how it is addressed.
Common trap: disclosure alone never resolves a conflict. It comes in addition to addressing it in the client's best interest.
3. Ethics and rules
Rules say what is required or prohibited. Ethics goes further: it guides your choices where no specific rule applies. CIRO's standards of conduct require high standards of ethics and conduct, acting openly and fairly, and no conduct unbecoming or detrimental to the public interest. In a scenario, an answer that follows the letter of a rule but harms the client deserves a second look.
4. Personal financial dealings with clients
Employees and Approved Persons must not engage in personal financial dealings with clients. The main types:
- accepting a payment or benefit for client business from anyone other than the dealer (a non-cash gift of minimal value, given infrequently, may be acceptable). Compensation for services provided through an approved outside activity is a separate exception;
- entering into a settlement agreement with a client, or paying their account losses from personal funds, without the dealer's prior written consent;
- borrowing from a client, unless the client is a financial institution lending in the normal course of its business, or a related person under the Income Tax Act (Canada) and the dealer's policies are followed (for a representative, with the dealer's prior written approval);
- lending to a client, except on the same related-person conditions;
- controlling a client's financial affairs, for example under a power of attorney, on the same related-person conditions. The related-person restriction does not apply to authority exercised solely under a compliant managed or discretionary account agreement;
- other arrangements: the rule's list isn't exhaustive, so mixing your money with a client's, for example in a joint investment, is caught too.
Reflex: anything that mixes your money with a client's is a warning sign. The exceptions are narrow.
5. Positions of influence and outside activities
- Position of influence: a role in which people may be susceptible to your influence, such as a doctor with patients or a leader of a religious organization. A registered individual in that role must not trade for, or advise, the people susceptible to that influence, or the people they know are that person's spouse, parent, sibling, grandparent or child. The role must be reported, paid or not.
- Outside activities: a second job, a board seat or a volunteer role. The Approved Person needs the dealer's prior approval. Before approving, the dealer weighs the risk of client confusion and conflicts of interest; afterwards, it supervises the activity and keeps records.
6. Confidentiality, information control and cybersecurity
Client information is confidential, and the dealer must have policies and procedures to protect it.
- Information barriers limit the flow of inside information inside the firm, for example from corporate finance to the traders and analysts.
- The grey list (confidential, seen only by those who monitor trading) and the restricted list (shared across the firm) help control trading in issuers the firm has inside information about.
- Cybersecurity protects confidential information. The dealer is responsible for reporting cybersecurity incidents to CIRO in writing within three calendar days of discovering them. Reporting covers incidents that have resulted in, or are reasonably likely to result in, substantial harm to any person, a material operational impact, activation of the dealer's business continuity or disaster recovery plan, or a legally required notification to another authority.
Three important distinctions to understand
- Disclosing and addressing a conflict. Disclosure informs the client; it doesn't replace addressing the conflict in the client's best interest.
- An ordinary client and a related person. Borrowing, lending and powers of attorney turn on this distinction, and on the dealer's approval.
- Approval and supervision. An approved outside activity is still supervised; approval isn't a one-time decision.
Test yourself: 3 questions
Original CIROPrep questions, in the style of the exam.
1. A dealer has a material conflict of interest with its clients. Which statement is most accurate?
- a) Disclosing it to clients in writing is enough on its own
- b) It must be addressed in the clients' best interest, and avoided if it can't be
- c) It must always be avoided, whatever controls the dealer could put in place
- d) It must be reported to CIRO, which decides how the dealer handles it
Answer
b) A material conflict must be addressed in the client's best interest, or avoided. Disclosure is required when a reasonable client would expect it, but it never resolves the conflict on its own. It must be avoided only when it can't be addressed (c), and the dealer itself, not CIRO, must identify, address and disclose its conflicts (d).
2. A long-time client, an individual who is not a related person, offers to lend you $5,000 to help you out. What should you do?
- a) Accept, once your dealer has approved the loan in writing
- b) Accept if you repay it quickly
- c) Decline, and follow your dealer's policies
- d) Accept, and tell your manager later
Answer
c) Borrowing from a client is a prohibited personal financial dealing. The exceptions are narrow: a financial institution lending in its normal course of business, or a related person under the dealer's policies and approval. An unrelated client fits neither, and dealer approval doesn't make a loan from an ordinary client acceptable (a).
3. A satisfied client wants to give his Registered Representative $300 in cash as a thank-you. Which statement is correct?
- a) The representative should decline it: the gift exception covers only non-cash benefits of minimal value, given infrequently
- b) The representative may accept it if they disclose it to the dealer
- c) The representative may accept it because it is a one-time gift
- d) The representative may accept it if the client puts the offer in writing
Answer
a) Accepting a payment or benefit for client business from anyone other than the dealer is a prohibited personal financial dealing. The gift exception covers only a non-cash benefit of minimal value, given infrequently, that a reasonable person wouldn't see as a conflict. Cash doesn't qualify, even if disclosed (b), given once (c) or offered in writing (d).
Continue your preparation
Want to practise Element 9 in more depth? The Module — Element 9 has lessons, practice questions with an explanation for every answer, summaries, flashcards, a mind map and exam tips, in English and French. $29 plus applicable sales taxes · one payment · 6 months of access. Explore the Element 9 module.
Not sure which elements to prioritize? Take the free CIRE diagnostic: 27 questions, about 25 minutes, with a study plan based on your results.
Read next: Element 3, scope of client relationships and the CIRE study plan.
