Ethics & Trust In The Investment Profession Flashcards
What is a profession?
community that has specialized knowledge & skills, commitment to serve others, and a shared code of ethics
Describe the 3 steps to CFA Institute professional conduct program.
Grounds for discipline: any act which violates the code & standards
Investigation by Designated Office (DO): DO conclude investigation with no disciplinary action. If disciplinary action you can accept it or go to hearing
Hearing: member rejects sanction, case against member prepared to take place in front of hearing panel of 3 or more members (aka DRC (Disciplinary Review Committee)
What is ethics?
Ethics is study of making good decisions
What does ethics encompass?
Encompasses set of moral principals & rules of conduct that provide guidance for our behavior
What is code of ethics?
Publicly communicates established principles & expect behavior of its members
What is standards of conduct?
benchmark for minimally acceptable behavior of community members and can help clarify code of ethics
What are laws & regulations?
Rules of conduct defined by government or related entity’s
What are the 3 challenges to ethical behavior? OSF
- overconfidence
- situational influences
- focusing on immediate instead of long-term outcomes or consequences of a decision
What are situational influences?
External factors that may shape our behavior
Describe the 4 step approach to ethical decision making.
- Identify: relevant facts, stakeholders, conflicts of interest
- Consider: situational influences, alternative actions, etc.
- Decide & act on it.
- Reflect weather the outcome was anticipated
Decision makers who use a compliance approach are most likely to:
a. Avoid the situational behaviors
b. Oversimplify decision making
c. Consider more factors when using an ethical decision-making approach
B. Oversimplify decision making
To maintain trust, the investment management profession must be interdependent with:
A. Regulators
B. Employers
C. Investment firms
C. Investment firms
Investment firms and investment professionals must be interdependent to maintain trust
When an ethical dilemma occurs, an investment professional should most likely first raise the issue with a:
A. Mentor outside the firm
B. Professional body’s hotline
C. Senior individual in the firm
C. Senior individual in the firm
some businesses may be required to be confidential inside a business so best to stay with in the business if possible
What is the 4 step approach to ethical decision making framework?
- Identify
- Consider
- Decide & Act
- Reflect
Where are the 5 sources a professional conduct inquire comes from? MWMPC
- members & candidates must self disclose on all matters the question their professional conduct
- written complaints received by professional conduct staff can warrant an investigation
- media, regulator notices, or another public source
- proctors on testing days
- CFA institute self conducting analysis
What are 3 possible sanctions imposed if the code & standards of CFA institute are broken? PSR
- public censure (formal statement of disapproval)
- suspension of membership and use of CFA designation
- revocation of the CFA charter
What are the 5 steps of CFA Institute Professional Conduct Program?
- once PCP staff become aware of potential violation, they may initiate formal inquiry
- In the course of their inquiry, PCP staff will request a written explanation from the member or candidate and gather any other relevant information.
- Based on the PCP staff’s findings, a Designated Officer may either conclude that no disciplinary action is necessary, issue a cautionary letter, or propose a disciplinary sanction.
- If a disciplinary sanction is proposed, the member or candidate may either accept it or ask for the case to be heard by a panel of 3 or more Disciplinary Review Committee (DRC) members.
- If requested, the DRC panel will determine what, if any, sanction is appropriate. Sanctions may range from public censure to the revocation of a member’s charter.
