Ethics and Trust in the

Investment Profession
Ethical Code and Standards

© 2019 by Keith Tan. All rights reserved.

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Ethics and Trust in the
Investment Profession
Ethical Code and Standards
1. Professional Code and Standards
2. Ethical vs. Legal Standards
3. Ethical Decision-Making Framework
 Ongoing
relationship

TRUST
Specialised
Knowledge serve
Specialised
Skills

Professional Clients
≠customers

Ethical Code and Standards

1. Professional Code and Standards 2. Ethical vs. Legal Standards 3. Ethical Decision-Making Framework
 TRUST

Shared Values
Code of
Ethics Principles
Professional Clients
Expected Behaviours

a r d S t andard Set of rules/standards that

nd Stand ard
Sta II III
require some minimum
I
level of ethical behaviour

Ethical Code and Standards

1. Professional Code and Standards 2. Ethical vs. Legal Standards 3. Ethical Decision-Making Framework
 CFA Institute
Code and Standards
Code and Standards
apply to all candidates
and members principle-based standards vs rule-based standards

I have to ✦honesty narrowly defined

follow all these ✦integrity
standards?! Code of
Ethics ✦transparency apply to specific
groups
✦diligence
✦placing client under specific
interests first circumstances
d a r d
Stand S
ardt andard
Sta n
I II III
at all times regardless of
title, position, occupation,
geographic location, or
specific situation

Ethical Code and Standards

1. Professional Code and Standards 2. Ethical vs. Legal Standards 3. Ethical Decision-Making Framework
 Laws and
Code and Standards
Regulations
ethical standards legal standards

S
a rtd
a Code
n d a r of
a d
Stand
n ard d
St I Ethics
I II II

Unethical but NOT Illegal AND Illegal but NOT

illegal actions unethical actions unethical actions

Insider Trading Whistleblowing

Not illegal in some May violate laws regarding

countries confidential information
Unethical and prohibited Ethical conduct if intent is to
by code and standards protect clients’ interests

Ethical Code and Standards

1. Professional Code and Standards 2. Ethical vs. Legal Standards 3. Ethical Decision-Making Framework
 Ethical Decision-Making Framework

Important facts Situational influences / Guidance from

behavioural biases trusted sources

$$$$$ I’ll help to

Family think through
I should and identify
Conflicts Info you alternative
please the boss
Clients Employer actions
would like Colleague/
to have I want to be first! mentor

1. Identify 2. Consider Consult Compliance

Colleagues or Legal Counsel
Stakeholders Guidance from firm’s policies
duties
/ Code and Standards
Code and Applicable ethical and Firm Code and
Standards
legal requirements Policies Standards

Assess decision and outcomes 4. Reflect 3. Decide and Act Arrive at the most ethical
Consider whether the decisions had decision and act on it
their intended results

Ethical Code and Standards

1. Professional Code and Standards 2. Ethical vs. Legal Standards 3. Ethical Decision-Making Framework
 Ethical Decision-Making Framework
Give
this IPO a Situational influences /
Stakeholders Important facts favourable
IPO has poor valuation (firm valuation! behavioural biases
Employer
duty of loyalty to has poor earning potential) Sense of loyalty to Consult Compliance
employer If IPO fails, employer could lose employer or Legal Counsel
more deals Bonuses if IPO is
Investing public (client)
successful You need a
duty of loyalty to Employer reasonable
clients basis
Applicable ethical and 1. Identify 2. Consider
legal requirements
Standard IV(A) Loyalty to employers Va IPO Guidance from firm’s policies
lua / Code and Standards
tio
Standard III(A) Client’s interests come first n Clients’ interests should
Firm Code and always have priority over
Standard V(A) Reasonable basis for recommendations Standards
Policies employer’s interest
Analyst
4. Reflect 3. Decide and Act Arrive at the most ethical
Assess decision and outcomes decision and act on it
Consider whether the decisions had
their intended results I choose to dissociate and
reject my employer's request
Ethical Code and Standards
1. Professional Code and Standards 2. Ethical vs. Legal Standards 3. Ethical Decision-Making Framework
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