Notesale: Turn your study into money

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Concepts

Description

Ethics

Ethics and Trust in the Investment Profession
Ethics : a set of shared beliefs about what is good/acceptale behaviour, and what is bad/unacceptable behaviour

Code of ethics

Code of ethics : written set of moral principles that can guide behaviour by dexcribing what is considered acceptable behaviour
Profession : group of people with specialised skills and knowledge who serve others and agree to be have in accordance with a code of ethics
Role of code of ethics in defining a profession : a way to communicate to the public that its members will use their knowledfe and skills to serve their clients in an honest and ethical
manner
Code of ethics for members of CFA Institute :
- Act with integrity, competence, dilligence, respect and in ethical manner with the public, clients, employees, colleagues in the investment profession, and other participants in the
global capital markets
- Place the integrity of the investment professional and the interest of clients above their own personal interests
- Use reasonable care and exercise independent professional judgement when conducting investment analysis, making investment recommendations, taking investment actions, and
engaging in other professional activities
- Practice and encourage other to practice in a professional and ethical manner
- Promote the integrity and viability of the global capital markets for the benefit of society
- Maintain and improve their professional competence and other investment professionals

Challenge to ethical behaviour

- Individuals tend to overrate the ethical quality of their behaviour on a relative basis, and overemphasize the importance of their own personal traits in determining the ethical quality of
their behaviour
- Situational influences (loyal to employer, supervisor, organisation, etc
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Investment advice and management are intangible products → trust
in investment professionals is very important
Consequence of ethical failure :
- Damage client wealth ; impede the success of investment firms and investment professionals
- Lack of trust in financial advisors → reduce funds entrusted to the financial advisors → ↑ cost of raising capital for
- Misallocation of capital → reduce the growth of the economy and the well-being of its people
Not all unethical actions are illegal, and vice versa
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The framework is as follows:
- Identify : relevant facts, affected stakeholders and duties owed, ethical principles and conflict of interest among them
- Consider : Situational influences, additional guidance, alternative actions
- Decide and act
- Reflect : was the outcome as anticipated? why or why not?

Concepts

Description

1
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Knowledge of the law : understand and comply with all applicable laws, rules and regulations (must comply with the more strict law, rule and regulation)
2
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Client's gifts are acceptable, but must be disclosed to employer)
3
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Violations include :
- Do not cite the source of 3rd party researches, except from recognised financial and statistical reporting services
- Guarantee specific return on

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