Ethics, Professionalism and Risk Flashcards
CISI Code of conduct
1 - Personal accountability
2 - Client focus
3 - Conflict of interest
4 - respect for market partners
5 - Professional Development
6 - Aware of capabilities
7 - Respect others & environment
8 - Speak up and listen up
Checklist for deciding best course of action
Honest
Open - everyone aware consequence
Transparent - clear not misleading
Fair
Conduct Risk
FCA expects firm own definitions
“the risk that firm behaviour will result poor outcome for customers”
Culture of short term profits vs ethical and fair treat customer
Should be promoting
- good behaviour across all aspects of organisation
- culture of zero tolerance for misconduct
Firms need to refrain from in terms of conduct risk
- priorities profits over ethics , or commercial interest over customer
- tick box based approach to compliance
- disclosure from customer absolves firm from all responsibilities to the customer
- Complying only with letters not spirit of laws
Key components or risk management framework
Risk policies and governance at board level
Risk oversight function to
Identify assess control monitor + report risks and controls day to day risk management
Management of Risk
Risk appetite / Risk tolerance
not to avoid risks but to manage them to be consistent with firms objectives
Compliance to help with management of the risks
Internal Risks
Strategic Operational Legal and regulatory reputational financial
External Risks
Shocks and natural events stakeholders social and market competitive economic technological political
Risk Management and Compliance Functions
- Given formal status in firm
- Independant
- Power and resources to perform their role
- Need to balance the roles of advisor and watchdog
Protecting and adding shareholder value;
Avoid exposure to too much risk
reduce likelihood of action taken by regulators
avoid client litigation
reject and identify choices don’t comply regulation
BIS guidance on compliance (The Board)
10 Principles
1) The Board overseeing management of compliance risk
BIS guidance on compliance (The Senior Management)
10 Principles
2) Managing compliance risk
3) Establishing compliance policy
4) Establish compliance function
BIS guidance on compliance (The Compliance Function)
10 Principles
5) Independant
6) Adequately resourced
7) Effective in managing compliance risk
8) Subject to internal audit
BIS guidance on compliance (The Firm)
10 Principles
9) All local laws and regulations should be obeyed
10) Outsourced compliance tasks should be appropriately overseen
Compliance Risk
Legal or regulator sanctions due to failure to comply with laws, regulations, rules, standards, codes of conduct
BIS states responsibility lies with senior management
Measures;
Observe proper standards of market conduct
Manager conflicts of interest
Conduct risk management and treating customers fairly
Ensure suitability of customer advice
Establish independent, adequately resourced, effective compliance function
Effective Compliance Function
Purpose;
Assurance to senior managers and board of compliance
Advise board, management and staff of compliance responsibility
Identify and record good and bad practice
Provide analysis and early warning of regulatory change
Build relationship with regulators
Respond and co-ordinate responses to proposed legislation and regulation
- seen advantage to business
- consulted regularly
- valued by staff
