Unit 2 Lesson 1

Question 1

Define Ethics.

Answer 1

Ethics refers to the principles of conduct that guide individuals or groups. It sets the standards of behavior expected from you and your group. Ethical conduct aligns with approved standards, while unethical conduct does not.

Question 2

Describe the MFDA’s standard of conduct rule.

Answer 2

MFDA Rule 2.1.1 establishes the ethical conduct standards for Dealing Representatives. As a representative, you are required to deal fairly, honestly, and in good faith with clients. High standards of ethics and conduct in business transactions are expected, and you must avoid engaging in practices that are unbecoming or detrimental to the public interest. Maintaining proper character, business repute, and possessing appropriate experience and training are also essential. The rule assumes that Dealing Representatives will have the expected training and experience.

The expectation that you will adhere to the standard of conduct, applies not only to the letter of the regulation,
but also to the spirit of the regulation as well.

Question 3

Even in the absence of the MFDA’s rules (of conduct), mutual fund
dealers and their Dealing Representatives would adopt the standard of conduct to….?

Answer 3

to safeguard their reputation and that of the industry, attract and retain clients, and ensure success both in the short and long term.

Question 4

Discuss best practices for proper conduct.

Answer 4

The best practices derived from the standard of conduct include understanding the client’s financial situation, presenting investment recommendations honestly, prioritizing the client’s best interests, distinguishing between facts and opinions in recommendations, safeguarding client information confidentiality, and staying updated on new laws and market products. While specific rules may codify some of these practices, they all logically flow from the standard of conduct.