L1. Ethics and Trust in the Investment Profession

Question 1

What is ethics?

Answer 1

Encompasses a set of moral principals and rules of conduct that provide guidance for our behaviour

Question 2

Moral principals or ethical principals are

Answer 2

Beliefs regarding what is good, acceptable or obligatory behaviour and what is bad, unacceptable or forbidden behaviour

Question 3

Code of ethics are

Answer 3

Specific communities or societal groups in which we live and work sometimes codify their beliefs about obligatory and forbidden conduct in written set of principles

Question 4

Standards of conduct

Answer 4

Serve as benchmarks for the minimally acceptable behaviour of community members and can help clarify the code of ethics

Question 5

A profession is

Answer 5

An occupational community that has specific education, expert knowledge and a framework of practice and behaviour that underpins community trust, respect and recognition

Question 6

How profession establish trust?

Answer 6

1. Professions normalize practitioner behaviour
2. Professions provide a service to society
3. Professions are client focused
4. Professions have high entry standards
5. Professions possess a body of expert knowledge
6. Professions bosses a body of expert knowledge
7. Professions encourage and facilitate continuing education
8. Professions monitor professional conduct
9. Professions are collegial
10. Professions are recognised oversight bodies
11. Professions encourage the engagement of members

Question 7

Challenges to adhering ethical conduct

Answer 7

1. Overconfidence of own’s ethical standards (Overconfidence bias) - Placing too much importance on internal traits and intrinsic movements
2. Situational influences - External factors that shape of thinking, decision making and behaviour; shifts brain’s focus from long term to short term

Question 8

Ethical decision making framework consists of:

Answer 8

1. Identify - Relevant facts, stakeholders and duties owned, ethical principles, conflicts of interests
2. Consider - Situational influences, additional guidance, alternative actions
3. Decide and act
4. Reflect - Was the outcome as anticipated? Why and why not?

Question 9

Practice problems

Answer 9

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