Chapter 2

Question 1

Ethics

Answer 1

A set of consistent values that guide individual behaviour

Question 2

Characteristics of Values

Answer 2

They are beliefs, not facts
they are long lasting, but not unchangeable
they guide behaviour

Question 3

End Values

Answer 3

represents the goals towards which we strive and influence how we act today to achieve tomorrow’s goals (i.e. family security, self respect)

Question 4

Means Values

Answer 4

the actions we take in the present to achieve a future goal (i.e. honesty, responsibility)

Question 5

Unified Value System

Answer 5

a system in which the means and ends values mutually reinforce and support each other

Question 6

Rules based regulation

Answer 6

subject to prescriptive, detailed, and technical standards

Question 7

Principles based regulation

Answer 7

parallels and overlaps the ethical decision making process, industry participants are expected to apply judgment and discretion

Question 8

Prudential regulation

Answer 8

(capital adequacy standards) investment dealers maintain an appropriate level of capital and have prudent and appropriate internal controls

Question 9

Right vs. Wrong Ethical Dilemma

Answer 9

One choice is clearly wrong

Question 10

Ways to determine right vs. wrong

Answer 10

• legal test
• smell test (intuition)
• front page test (reputation)
• mom test

Question 11

Types of Right vs Right Dilemmas

Answer 11

• Integrity dilemma: trust vs. loyalty
• Societal dilemma: individual vs. group
• Goal based dilemma: short term vs. long term
• Fairness dilemma: justice vs. mercy

Question 12

The ends based resolution principle

Answer 12

states that the action chosen should result in the greatest good for the greatest number of people

Question 13

The rules based resolution principle

Answer 13

states that action chosen should follow the rule that deals most effectively with the situation

Question 14

The social contract based resolution principle

Answer 14

views the action in terms of how it affects the well-being of the group

Question 15

The personalist resolution principle

Answer 15

supports the decision that is most authentic to the decision maker

Question 16

The ethical decision making process

Answer 16

1. Identify the issue and determine whether it represents an ethical issue regarding further analysis
2. Identify the person who must decide on a course of action
3. Gather the facts, identify potential courses of action, and identify the potential consequences of each action
4. Test each course of action by applying legal, small, front page and mom tests
5. If all options pass the tests, analyze the situation and determine which ethical principles are in conflict
6. Apply the four resolution principles to determine the best choice
7. Make the decision

Question 17

What are the 4 resolution principles?

Answer 17

• The ends based principle
• Rules based principle
• Social contract based principle
• The personalist principle

Question 18

Code of Ethics

Answer 18

a set of rules, either written or unwritten, that specifies the rules of behaviour within a group

Question 19

Conflict of Interest

Answer 19

occurs when a duty owed to another person is compromised by either a personal interest or a conflicting duty owed to a third party

Question 20

Agency

Answer 20

a relationship in which one party is authorized to bring another party into contractual relations with a third party