Reading 1: Ethics and Trust in the Investment Profession

Question 1

Explain Ethics.

Answer 1

Ethics is a study of good and bad behavior. The benefits of ethics is that it improves outcomes for stakeholders which include clients/customers, coworkers, employers, and the investment profession as a whole.

Question 2

Describe the role of a code of ethics in defining a profession.

Answer 2

Code of Ethics is the established rules of moral principles established to benefit the stakeholders influenced by a profession.

And how does a Code of Ethics influence a profession?

Profession- it refers to a group of people with specialized skills and knowledge who serve others and agree to behave in accordance with a code of ethics that benefits the stakeholder.

Question 3

Identify challenges to ethical behavior.

Answer 3

1. ) An issue involves individuals that tend to overrate the ethical quality of their behavior on a relative basis and overemphasize the importance of their own personal traits in determining the ethical quality of their behavior.
   - Well, this means that when you believe that you ethical behaviors that you grew up with are more right than the ethical behaviors of the code of ethics set by the profession, than there’s an issue.

The best way to judge ethical behavior is to allow people to be put into external situational influences or behavior:

**we can assess how they react and determine the codes of conduct.

Question 4

Describe the need for high ethical standards in the investment industry.

Answer 4

Investment professionals need to be very ethical because they are responsible for a client’s wealth:

a.) so much importance to the code of ethics in investment profession than other businesses because of peoples’ wealth being given out.

b. ) another issue includes the fact that high ethical manner can damage not only client wealth but also impede the success of investment firms.
- you will lose clients if they find out that you are acting
unethically.

c.) have societal benefits:
1.) Growth of an Economy
2.) Well-being of its People (if you act negatively, it
will cause issues within the clients)

Question 5

Distinguish between ethical and legal standards.

Answer 5

Unethical does not mean illegal. And illegal does not mean unethical:

• Law is different from ethics & most importantly, ethics is
  above the law. That’s why we have codes of ethics.

Question 6

Describe and apply a framework for ethical decision making

Answer 6

Ethical decisions will be improved when ethics are integrated into a firm’s decision making process:

• so a firm that uses ethics on a daily basis will have
  good ethical making decision ability.
• So there is an ethical decision making framework put into place already:
  (ICDR) I- identify, C- consider, D-decide, R- reflect

1. ) Making ethical decisions should be a #1 priority.
2. ) So, FIRST, you need to create a code of ethics.
3. ) Which is separated from the law & set ABOVE the law.
4. ) Establish it as an importance for the profession!
5. ) Enforce the law as well.