Ethical and Unethical Behaviour

Question 1

Q: What is ethics in the context of financial services?

Answer 1

A: A system of moral principles guiding behaviour and decision-making.

Question 2

Term: Integrity

Answer 2

Definition: Acting honestly and consistently with strong moral principles.

Question 3

Q: What are the core ethical values in financial services?

Answer 3

A: Honesty, integrity, fairness, transparency, and professionalism.

Question 4

Term: Conflicts of Interest

Answer 4

Definition: Situations where personal interests may compromise professional judgment.

Question 5

Q: What is the purpose of the FCA’s Conduct Rules?

Answer 5

A: To set out basic standards of good personal conduct.

Question 6

Term: Fairness

Answer 6

Definition: Treating clients equally and avoiding biased decisions.

Question 7

Q: What is whistleblowing?

Answer 7

A: Reporting unethical or illegal behaviour within an organisation.

Question 8

Term: Transparency

Answer 8

Definition: Being open, clear, and honest in all dealings with clients.

Question 9

Q: Why is treating customers fairly (TCF) important ethically?

Answer 9

A: It ensures clients are placed at the heart of business decisions.

Question 10

Term: Professionalism

Answer 10

Definition: Conducting oneself with competence, courtesy, and respect.

Question 11

Q: What are some signs of unethical behaviour in financial advice?

Answer 11

A: Mis-selling, churning, conflicts of interest, or hiding fees.

Question 12

Term: Churning

Answer 12

Definition: Excessive trading on a client’s account to generate commissions.

Question 13

Q: What does the FCA expect in terms of client communication?

Answer 13

A: That it is fair, clear, and not misleading.

Question 14

Term: Due Diligence

Answer 14

Definition: A reasonable level of investigation and care before making a recommendation.

Question 15

Q: What is a fiduciary responsibility?

Answer 15

A: A legal and ethical obligation to act in the best interests of the client.

Question 16

Term: Bribery Act 2010

Answer 16

Definition: UK legislation prohibiting bribery and requiring adequate prevention measures.

Question 17

Q: How can firms prevent unethical behaviour?

Answer 17

A: Through training, robust systems, and a strong compliance culture.

Question 18

Term: Ethical Dilemma

Answer 18

Definition: A situation where a person must choose between conflicting ethical values.

Question 19

Q: What is the ‘fit and proper’ test?

Answer 19

A: An FCA assessment of honesty, integrity, competence, and financial soundness.

Question 20

Term: Tipping Off

Answer 20

Definition: Illegally warning someone that they are under investigation or suspicion.

Question 21

Q: Why must advisers disclose all relevant information?

Answer 21

A: To help clients make informed decisions.

Question 22

Term: Non-Disclosure

Answer 22

Definition: Withholding material facts that could influence decision-making.

Question 23

Q: What is the difference between legal and ethical behaviour?

Answer 23

A: Legal is about rules; ethical is about doing what’s morally right—even if not required by law.

Question 24

Term: Suitability

Answer 24

Definition: Matching advice and products to the client’s needs, objectives, and circumstances.

Question 25

Q: Why is confidentiality important in financial services?

Answer 25

A: It protects the client’s privacy and builds trust.

Question 26

Term: Insider Dealing

Answer 26

Definition: Illegally trading on material, non-public information.

Question 27

Q: What is the role of ethics in risk profiling?

Answer 27

A: Ensuring the client’s best interests and financial well-being are prioritised.

Question 28

Term: Soft Skills

Answer 28

Definition: Interpersonal skills like empathy, listening, and communication.

Question 29

Q: What is an ethical culture?

Answer 29

A: A work environment that promotes and supports ethical behaviour.

Question 30

Term: SM&CR (Senior Managers and Certification Regime)

Answer 30

Definition: Encourages individual accountability and ethical leadership.

Question 31

Q: What’s an example of good ethical practice?

Answer 31

A: Refusing to recommend an unsuitable product even if it benefits the adviser.

Question 32

Term: AML (Anti-Money Laundering)

Answer 32

Definition: Procedures and regulations to prevent the use of financial systems for illegal gain.

Question 33

Q: Why is ethical leadership important?

Answer 33

A: It sets the tone for the rest of the organisation and promotes responsible behaviour.

Question 34

Term: Corporate Social Responsibility (CSR)

Answer 34

Definition: A business approach that contributes to sustainable development by delivering social, environmental, and economic benefits.

Question 35

Q: What is the role of CPD in ethical conduct?

Answer 35

A: Ensures advisers stay up to date and maintain competence.

Question 36

Term: Vulnerable Clients

Answer 36

Definition: Clients who may be especially at risk of harm due to personal circumstances.

Question 37

Q: How should firms handle vulnerable clients ethically?

Answer 37

A: With additional care, clear communication, and tailored service.

Question 38

Term: Mis-selling

Answer 38

Definition: Recommending a product that is not suitable for the client’s needs.

Question 39

Q: What’s the ethical approach to charging fees?

Answer 39

A: Transparency and fairness—fees should reflect value and be agreed in advance.

Question 40

Term: ESG (Environmental, Social, Governance)

Answer 40

Definition: Criteria used to assess ethical and sustainable investing.

Question 41

Q: What does "fair treatment of customers" look like in practice?

Answer 41

A: Offering suitable products, avoiding pressure selling, and resolving complaints fairly.

Question 42

Term: Accountability

Answer 42

Definition: Being answerable for decisions and actions, especially in leadership roles.

Question 43

Q: Why is record keeping an ethical issue?

Answer 43

A: Incomplete or inaccurate records can lead to harm or poor outcomes for clients.

Question 44

Term: Compliance Culture

Answer 44

Definition: A firm-wide attitude that values adherence to laws and ethical standards.

Question 45

Q: How does tone from the top affect ethics?

Answer 45

A: Leadership strongly influences whether ethical values are adopted across the organisation.

Question 46

Term: Ethical Investment

Answer 46

Definition: Investing in a way that aligns with moral or social values.

Question 47

Q: What’s the FCA's stance on inducements?

Answer 47

A: They must not conflict with the duty to act in the best interests of the client.

Question 48

Term: Transparency of Remuneration

Answer 48

Definition: Clients should be told clearly how advisers are paid and any potential conflicts.

Question 49

Q: Why are professional codes of conduct important?

Answer 49

A: They provide a framework for ethical decision-making and accountability.

Question 50

Term: Ethical Breach

Answer 50

Definition: A violation of expected standards of professional behaviour.