Ethics and Trust in the Investment Profession Flashcards
What is ethics?
Ethics encompasses a set of moral principles and rules of conduct that provide guidance for our behavior.
The word “Ethics” comes from the Greek word “Ethos”, meaning character, used to describe the guiding beliefs or ideals characterizing a society or societal group.
What are beliefs and principles?
Beliefs are assumptions or thoughts we hold to be true.
A principle is defined as a belief or fundamental truth that serves as the foundation for a system of belief or behavior or a chain of reasoning.
Our beliefs form our values, those things we deem to have worth or merit.
What are moral or ethical principles?
These are beliefs regarding what is good, acceptable, or obligatory behavior and what is bad, unacceptable, or forbidden behavior.
Ethical principles may refer to beliefs regarding behavior that an individual expects of himself or herself, as well as shared beliefs regarding standards of behavior expected or required by a community or societal group.
What is ethical conduct?
Behavior that follows moral principles and balances self-interest with both the direct and the indirect consequences of the behavior on others.
Name examples of ethical principles.
Honesty, transparency, fairness, justice, diligence, respect for the rights of others.
What is a Code of Ethics?
Specific communities or societal groups in which we live and work sometimes codify their beliefs about obligatory and forbidden conduct in a written set of principles.
What are Standards of Conduct?
Benchmarks for the minimally acceptable behavior of community members and can help clarify the code of ethics.
What is a profession?
An occupational community that has specific education, expert knowledge, and a framework of practice and behavior that underpins community trust, respect and recognition. Most professions emphasize an ethical approach, the importance of good service, and empathy with the client.
What are characteristics of professions that establish trust?
Professions normalize practitioner behavior.
Professions provide a service to society.
Professions are client focused.
Professions have high entry standards.
Professions possess a body of expert knowledge.
Professions encourage and facilitate continuing education.
Professions monitor professional conduct.
Professions are collegial.
Professions are recognized oversight bodies.
Professions encourage the engagement of members.
Professions are evolving.
Professionalism in investment management.
Trust in investment management.
What is a fiduciary duty?
The obligation to deliver a high standard of care when acting for the benefit of another party.
What is the GBIK?
CFA Institute Global Body of Investment Knowledge
What is the CBOK?
Candidate Body of Knowledge
How are the GBIK and CBOK continuously updated?
Practice analysis.
Through interactions with practicing investment management professionals, practice analysis helps ensure that the body of knowledge for the investment management profession remains current and globally relevant.
What is overconfidence in the context of ethics?
People tend to believe that they are ethical people and that their ethical standards are higher than average.
Describe the four steps of the ethical decision making framework.
Identify: relevant facts, stakeholders and duties owed, ethical principles, and conflicts of interest.
Consider: situational influences, additional guidance, alternative actions.
Decide and act.
Reflect: was het outcome as anticipated?
What are the six Codes of Ethics of the CFA Institute?
Members of the CFA Institute must:
- Act with integrity, competence, diligence, and respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
- Place the integrity of the investment profession and the interest of clients above their own personal interests.
- Use reasonable care and exercise independent professional judgement when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
- Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
- Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
- Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
What is the first Standard of Professional Conduct and what five subjects belong to it?
Professionalism
- Knowledge of the law
- Independence and Objectivity
- Misrepresentation
- Misconduct
- Competence
What is the second Standard of Professional Conduct and what two subjects belong to it?
Integrity of Capital Markets
- Material Nonpublic Information
- Market manipulation
What is the third Standard of Professional Conduct and what five subjects belong to it?
Duties to Clients
- Loyalty, Prudence, and Care
- Fair Dealing
- Suitability
- Performance Presentation
- Preservation of Confidentiality
What is the fourth Standard of Professional Conduct and what three subjects belong to it?
Duties to Employers
- Loyalty
- Additional Compensation Agreements
- Responsibilities of Supervisors
What is the fifth Standard of Professional Conduct and what three subjects belong to it?
Investment Analysis, Recommendations and Actions
- Diligence and Reasonable Basis
- Communication with Clients and Prospective Clients
- Record Retention
What is the sixth Standard of Professional Conduct and what three subjects belong to it?
Conflicts of Interest
- Avoid or Disclose Conflicts
- Priority of Transactions
- Referral Fees
What is the seventh Standard of Professional Conduct and what two subjects belong to it?
Responsibilities as a CFA Institute Member or CFA Candidate
- Conduct as Participants in CFA Institute Programs
- Reference to CFA Institute, the CFA Designation and the CFA Program
