Study Session 1 : Ethics and Trust in the Investment Profession Flashcards
What is ethics
- A set of shared belief about what is good or bad (acceptable) behaviour
- Refers to the study of good and bad behaviour
What is an ethical conduct ?
- A behaviour that follows moral principles and is consistent with society’s ethical expectations
- A conduct that improves outcomes for Stakeholders. It balances your self-interest with the impact on others
What is a code of ethics ?
It’s a written set of moral principles that can guide behavior by describing what is considered acceptable behavior.
What is the purpose of having a code of ethics ?
It’s a way to communicate the values, principles, and expectations of an organization or other group of people and provides a general guide to what constitutes acceptable behavior.
What is mostly included in a code of ethics ?
A set of rules or standards that require some minimum level of ethical behavior.
What is a profession ?
- It refers to a group of people with specialized skills and knowledge
- who serve others
- & agree to behave in accordance with a code of ethics.
What is the purpose of a professional code of ethics ?
It’s a way for a profession to communicate to the public that its members will use their knowledge and skills to serve their clients in an honest and ethical manner. It can increase public confidence and trust that members will act ethically.
What are the challenges to ethical behaviour ?
- Individuals 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.
- Situational influences
Name a few situational influences
- Social pressure from others.
- Loyalty to an employer, supervisor, organization, or coworkers
- The prospect of acquiring more money or greater prestige
Why high ethical standard is important in the investment profession ?
- Investment professionals are entrusted with client wealth
- The responsibility to protect and grow client asset through their specialized knowledge ans skills
- Intangible products
What are the negative effects of unethical behavior by financials services professionals ?
- A lack of trust that will reduce the finds entrusted to them and increase the cost of raising capital pour business investment and growth
- Perception of additional risk that will reduce the amounts invested and increase the returns required to attract investor capital
- Affect the allocation of the capital that is raised. It can reduce the growth of an economy and the well-being of its people
Name an example of what can seem to be an ethical behavior but illegal
- Whistle-blowing (report one’s employer’s actions against the best interests of clients by sharing what is considered private company information with authorities)
- Acts of civil disobedience
Name an example of unethical behavior that is legal
Recommending investment in a relative’s firm without disclosure
What is the purpose of ethical principles ?
- It sets a higher standard of behavior than laws and regulations.
- Ethical behavior requires more judgment
- New laws and regulations often result from recent instances of what is perceived to be unethical behavior.
What is the purpose of applying a framework for ethical decision making ?
It allow decision makers and teams to consider alternative actions as well as shorter- and longer-term consequences from various perspectives, improving the ethical aspects of their decisions.
