Lecture 2

Question 1

What are the two parts to unethical behavior?

Answer 1

Thinking process and deliberate action

Question 2

4 Indicators of Ethical Behavior

Answer 2

1. Trust
2. Fairness
3. Efficiency
4. Competence

Question 3

Ethical Issues in Matrix

Answer 3

1. Conflict of Interest
2. Fiduciary Responsibility
3. Power Asymmetry
4. Information Asymmetry
5. Moral Hazard
6. Social Responsibility

Question 4

Moral Hazard

Answer 4

Risk that one party in a transaction has not entered into the transaction in good faith

Question 5

Information Asymmetry

Answer 5

One party in a transaction has more superior information compared to another

Question 6

Power Asymmetry

Answer 6

One party forces its opinion on another party due to level of authority

Question 7

Fiduciary Responsibility

Answer 7

Legal duty to act solely in another party’s interests

Question 8

Conflict of Interest

Answer 8

Situation where someone is supposed to act one way but has incentive to act in another way

Question 9

4 Frameworks for Ethical Decision Making

Answer 9

1. Integrity, Honesty and Trust
2. Competence and Professionalism
3. Diligence
4. Respect

Question 10

5 Rules in Discussing Ethics

Answer 10

1. Take a stand
2. Clearly define the ethical issue/indicator
3. Explain
4. Identify who is at fault
5. Clearly state why you think it’s unethical

Question 11

What is PIPEDA?

Answer 11

Personal Information Protection and Electronic Documents Act

Question 12

Privacy

Answer 12

The right to control access to one’s personal and information about oneself

Question 13

When was PIPEDA Act enforced?

Answer 13

Jan 1, 2004

Question 14

PIPEDA Act

Answer 14

Must obtain consent before or at the time information is collected

individual can challenge its accuracy

Can only be used for purposes for which it was collected

Question 15

Under PIPEDA, if the organization is going to use personal information for any other purpose then the original reason collected, consent must NOT be obtained again.

True or False?

Answer 15

False, consent must be obtained again

Question 16

Personal Information Includes….

Answer 16

Any factual or subjective information that is recorded or not recorded about an individual

Question 17

Purpose of PIPEDA

Answer 17

Recognizes individuals right to privacy of their personal information

Question 18

Role of the Privacy Commissioner of Canada

Answer 18

Investigates complaints under privacy act and PIPEDA

Negotiate and find solutions

Make recommendations based on findings

Question 19

IBG YBG

Answer 19

I’ll be gone, you’ll be gone

Question 20

Agency Theory

Answer 20

Principle hires an agent to act on his or her behalf but the agent’s incentives aren’t aligned with the principal

Question 21

FINRA

Answer 21

Financial Industry Regulatory Authority

Question 22

Investment Policy Statement (IPS)

Answer 22

Documentation of client’s investment goals and compensation agreement

Question 23

Surrender Charges

Answer 23

Charges for withdrawing from an account

Question 24

Churning

Answer 24

Broker excessively buys and sells securities in client’s account to generate commissions

Question 25

Soft Dollars

Answer 25

Research and other products and services that are paid for using trading commissions.