Lecture #1 Flashcards
[FINAL] What are the key ethical indicators, what is the key factor of fiancial services, and what is required of everyone (all market particpants)?
Key Ethical Indicators are: Trust, Fairness, Efficiency, and Competence
Key factor in financial services is TRUST
A high degree of ethical behaviour is required from everyone: professionals, providers, clients to establish Trust
[FINAL] Market Manipulation, what is Information based manipulation and Transaction based manipulation?
what is one also known as?
Information based manipulation: Going on forms, spreading non factual information about stocks in order to boost stock price or lower price
Also known as: A pump and dump is a type of stock market fraud where a group of people artificially inflates (or “pumps”) the price of a stock by spreading false or misleading information, creating hype to attract buyers. Once the price has risen, they quickly sell off (or “dump”) their shares at the inflated price.
Transaction based manipulation: * They buy and sell the same security repeatedly—often between accounts they control.
This creates the illusion of high trading volume without any real change in ownership.
- Buying or Selling a lot of transactions to boost the price or make the price go down
[FINAL] what is the Fiancial System Based on?
Based on TRUSTING the other person to do the right thing
* Because the basis for ethical decision making may differ from one person to another we have rules, regulations, laws,
regulators, courts and judges.
BUT, what stays consistent, each person has the power to make a right and a wrong decision.
[FINAL] What are the first level of regulation in Canada? What are the main companies within that level
First, Federal:
The Office of the Superintendent of Financial Institutions (OSFI): They oversee financial institutions and pensions to maintain public trust in the financial system
- Regulating banks, insurance companies, trust companies, loan companies, and pension plans.
- Protecting depositors, policyholders, creditors, and pension plan members.
- Ensuring financial institutions can compete and take reasonable risks while safeguarding depositors’ funds.
The Canadian Securities Administrators (CSA) is a collaborative organization of provincial and territorial securities regulators in Canada. Its role is to:
- Develop consistent and harmonized policies and regulations across the country.
- Streamline regulatory processes and reduce duplication, benefiting companies seeking investment capital.
- Regulate all market registrants and participants.
[FINAL] What are the second level of regulation in Canada? What is the main within that level
Second, Provincial:
Provincial Securities Regulators: coordinate and harmonize regulations, policies, and practices regarding Canadian capital markets
- Protect investors from fraud and unfair practices.
- Ensure fair, efficient, and trustworthy capital markets through enforcement
[FINAL] Members of the CFA Institute and candidates must Act with “” “” “” ““…..
and Place the ““…….
Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients, prospective clients,……
Place the integrity of the investment profession and the interests of the clients above their own personal interests
What are the two types of Moral reasoning
Consequentialist reasoning: This approach focuses on the outcomes or consequences of an action. An action is considered morally right if it leads to the best overall results or the least harm. For example, lying might be acceptable if it prevents greater harm.
Categorical reasoning: This approach focuses on absolute principles, duties, or rights, regardless of the consequences. An action is considered morally right or wrong based on whether it aligns with these principles. For example, lying is always wrong, no matter the outcome, because honesty is a duty.
Consequentialist = “What will happen if I do this?”
Categorical = “Is this action right or wrong in itself?”
Define Ethics
Ethics: the principles that govern a person’s behavior or the conducting of an activity.
* the principles of conduct governing an individual or a group.
* the belief of how people should act.
* ethical behaviour is what holds professional organizations, companies, societies together. It makes them work.
Define Inappropriate, Illegal, Immoral, and Unethical behaviour
Inappropriate behaviour: Behaviour that is not in keeping with the occasion, the time, or the place (not necessarily unethical, not illegal).
Illegal behaviour: Behaviour or acts that contravene the laws of the jurisdiction in which the person acts (may or may not be unethical).
Immoral behaviour: is more focused on personal beliefs about right and wrong,
Unethical behaviour: is more focused on the rules and expectations within a particular setting (ex. professional setting)
People “_” to behave in a way that is either good or bad, right or wrong, ethical or unethical, legal or illegal.
- Behaviour is “”. It is ‘”.
- Unethical behaviour has “_”
choose
chosen, deliberate
victims
What is Ethical Behaviour?
Ethical Behaviour: Ethics are moral principles that govern a person’s behavior or their conduct
- Ethics is about making a decision to act on a choice made
- However, what is right and what is wrong is not always clear
- Some ethical behaviour is considered to be universal, Some is cultural based. Some is professional based
- in order to protect themselves, laws are passed to regulate behaviour
How does the CFA Institute regulate Ethical Behaviour?
Enforces ethical conduct in its members through the Professional Conduct Program
Every CFA member and candidate must sign annually and always abide by the Code of Ethics and Standards of Professional Conduct
Define Business Ethics
Business ethics: about setting and enforcing rules for how a company and its employees should act responsibly
Why is Ethical behaviour important?
Ethics is the “glue” that holds our society together
Ethical behaviour impacts society
Examples:
* Family leads to Divorce
* Corporations leads to loss of moral, high turnover, poor financial results, loss of investors, loss of credibility
* Teaching institutions leads to poor reputation, loss of students, loss of credibility, loss of teaching or research staff
Whever somone acts unethically:
1. There is always a “”. Someone that suffers as a result of your action
2. Your action is a result of a “” and “” “”
3. The unethcial act could have been avoided
4. you will “” for your action
5. You are beholden to someone else, you need someone else to “” for you
victim
premeditated, deliberate choice
pay
cover
Can behaviour be regulated to be ethical?
- In Canada, there are thousands of people employed regulating the financial services industry.
- There are over 24 different government organizations regulating the financial services industry
CFA Institute’s Standards of Professional Conduct — Standard I(A) Knowledge of the Law? What is the First standard called?
I.Professionalism
- Knowledge of the Law: Understand and comply with all applicable laws and regulations, prioritizing stricter requirements in case of conflict.
CFA Institute’s Standards of Professional Conduct — Standard I(B) Independence and Objectivity?
- Independence and Objectivity: Maintain independence and avoid conflicts of interest.
CFA Institute’s Standards of Professional Conduct — Standard I(C) Misrepresentation?
- Misrepresentation: prohibits CFA members from providing false, misleading, or exaggerated information about investment analysis, professional qualifications, or performance.
CFA Institute’s Standards of Professional Conduct — Standard I(D) Competence?
- Competence: requires professionals to work only within their expertise, seek training when needed, and act with skill and diligence
- If they lack competence in an area, they should seek additional training or consult experts.
CFA Institute’s Standards of Professional Conduct — Standard II(A) Material Nonpublic Information; What is the second Standard called?
- Material Nonpublic Information: Do not act on material nonpublic information.
Second Standard: Integrity of Capital Markets
CFA Institute’s Standards of Professional Conduct — Standard II(B) Market Manipulation
Market Manipulation: Avoid practices that distort market prices.
