Ethics Vs Regulations

Question 1

Briefly define ethics

Answer 1

Ethics is viewed as a set of basic principles that ensures people behave for the benefit of all

Question 2

What are some widely acknowledged fundamental ethical principles?

Answer 2

1. Honesty.
2. Fairness
3. Diligence.
4. Care and respect for others.

Question 3

What are some examples of unethical behaviour in financial institutions?

Answer 3

1. Ponzi Scheme: financial fraud where returns to earlier investors are paid using money from new investors instead of real profits. The scheme collapses when new investments stop.
2. Insider trading.
3. Mis-selling our financial products.

Question 4

What are the four reasons that highlight the importance of ethical behaviour?

Answer 4

1. Building public trust in financial markets, encouraging wider participation in them.
2. Promoting trust in investment professionals, encouraging public to use professionals to manage and advice on their investments.
3. Instilling trust in other stakeholders including those that provide capital to the industry. E.g. shareholders or providers of finance for transactions
4. Earning trust of regulators, allowing greater scope for self-regulation and less restrictive regulation of the participants in capital markets