Introduction To Ethics and Professionalism: A Guide To Sound Ethical and Professional Practice

Introduction to
Ethics and Professionalism
A Guide to sound ethical and professional practice
Presented by Robert Hamilton
© Fitz Ritson and Associates: No reproduction in whole or part without prior written consent
NAME OF LECTURER
ROBERT HAMILTON
CONTACT TELEPHONE:
817-1538 (cell)
OFFICE HOURS:
Monday-Friday 6pm-9pm
Saturday- 11am-6pm
EMAIL ADDRESS:
rhamilton@fitzritson.com
Welcome to the Programme
This course is designed to provide an

introduction to sound ethical standards
and professional conduct.
Students are strongly urged to practice the

standards and code of ethics
recommended in this presentation.
The Objectives of the Ethics
and Professional Course
At the end of this session students should be able to:
• Recognize the importance of ethics and

professional conduct in their area of business
• Identify areas of weakness in ethics and

professional conduct in their sector.
• Be able to provide a list of acceptable

professional conduct for their industry.
• Create a personal Code of Ethics and Conduct

for practice in their professional life.
Ethics and Professional Conduct
Course Content
Emphasis will be directed in the following areas:

• The concepts of Ethics and Professional Conduct
• The need for Ethics and Professional Conduct
• Professional Integrity and Objectivity
• Fundamental Responsibilities of Employees
• Professional responsibility to Employers and
Clients
• Confidentiality of client and company information
• Professional Misconduct
About the Principal Textbooks
Main text: Standards of Practice Handbook, 7TH Edition, 1996
The Association for Investment Management and Research
Supporting Text: Ethics and the Conduct of Business (Fifth Edition)

by John Boatright
The Association for Investment Management and Research (AIMR)

came about as a result of a unique ‘merger’ between the Financial
Analysts Federation (FAF) and the Institute of Chartered Financial
Analysts (ICFA) in 1990
One of the first acts of the AIMR was the adoption of

the Code and Standards.
Source: AIMR Standards of Practice Handbook – Seventh Edition (1996)
What is Ethics?
“The collection of a person’s beliefs and morals
makes up a set of principles known as ethics.
Ethics is the judgment about right and wrong or,
more specifically, a person’s moral obligations to
society that determine a person’s action”
Source: Fraud Examiners Manual “Criminology, Fraud Prevention Programs” – Association
of Certified Fraud Examiners (1998)
What is Ethics cont’d?
1. Ethics “a body of moral principles or

values”
- Webster’s Desk Dictionary – Portland House, New York, 1990
2. Ethics are “moral beliefs and rules

about right and wrong”
- Collins Cobuild English Language Dictionary – William Collins
Son & Co. Ltd, Glasgow, 1990
What is Ethics cont’d?
WHAT ARE THE MAIN FACTORS THAT DIRECT

ETHICAL DECISIONS?
• The Law and other regulations

• Industry and organizational ethical codes
• Social pressures
• Tension between personal standards and
organizational needs
Source: Fraud Examiners Manual “Criminology, Fraud Prevention Programs” – Association

of Certified Fraud Examiners (1998)
What is Ethics?
Questions to Ponder:
• DO LEGAL STANDARDS ESTABLISH ETHICAL

PRINCIPLES?
• IF IT IS LEGAL, IS IT ETHICAL?
What is Ethics?
HOW DOES ETHICS MANIFEST ITSELF IN HUMAN
BEHAVIOUR?
“ Ethical people measure their conduct by basic

principles rather than rules”
Source: Fraud Examiners Manual “Criminology,

Fraud Prevention Programs” – Association of Certified
Fraud Examiners (1998)
What is Professional Conduct?
The first step in defining this concept is to consider

the meaning of its root words – profession and
conduct.
A profession is “a type of job that requires special

training and brings a fairly high status..”
Collins Cobuild English Language Dictionary – William Collins Son & Co. Ltd, Glasgow, 1990
For the word conduct apply the meaning ‘behavior’
What is Professional Conduct?
(cont’d)
Professionalism has to do with the display of
“ skill and high standards” OR “qualities that
are typical or expected of a person in your
profession”
- Collins Cobuild English Language Dictionary – William Collins Son & Co. Ltd, Glasgow, 1990
Questions to ponder
Why do professional organizations
demand that their members observe
high ethical standards and conduct
themselves in a professional manner?
Do we really need ethical standards

and or professional conduct to be a
success? …. If yes, why?
Is it relevant?
Relevance in the Finance Industry
• Placing assets in the hands of other people requires immense

trust - An untrustworthy stockbroker, banker or insurance
agent finds few takers for his services.
• Financial scandals shock us because they involve people or

institutions we should be able to trust.
– EXAMPLES: Madoff, Enron and Stanford
Source: Ethics and the Conduct of Business-Fifth Edition

Relevance in the Political Sector
Former Government minister Francis Tulloch says

that “there are too many loopholes for corruption in
the political system, and suggests that new entrants
to representational politics should be provided with
guidelines and a code of ethics.”
Source: The Sunday Gleaner ‘Open to Corruption’
March 9. 2008
Relevance in the Public Sector
“Under the 2000 Corruption Prevention Act, public

officials who earn in excess of $2 million per year , or
who hold particularly sensitive positions are required
by law to file an account of their assets and earnings
annually.”
What does this mean in respect of the ethical and

professional standards in the public sector?
Source: The Daily Observer “It’s far from satisfactory – Anti-corruption body not happy
with compliance” – Wednesday, March 12, 2008
“…If we had a society in which money and materialistic values
were not as overriding, you would not have the level of
corruption that you have in the police force today…” Ian Boyne
Source: The Sunday Gleaner “Building an ethical Jamaica” – January 20, 2008
If we had more police personnel who were content

with the little they have, instead of wanting
to get rich overnight, you would have less
crime …If this one institution alone were less
corrupt and paid more attention to ethics, the country
would be different” Ian Boyne
Source: The Sunday Gleaner “Building an ethical Jamaica” – January 20, 2008
Ethics and Professional
Conduct
PROFESSIONAL MISCONDUCT is
“..any professional conduct involving dishonesty,

fraud, deceit, or misrepresentation…” Standard II (B)
Conduct
PROFESSIONAL MISCONDUCT (cont’d)
• some types of professional misconduct may

attract criminal sanctions while others attract civil
remedies
• should not be justified because of

ignorance
• is frowned upon by honest ‘well thinking’ people
Conduct
• FRAUD
• MISREPRESENTATION (of material fact)
• CONCEALMENT OF MATERIAL FACTS
Conduct
FRAUD
This is one type of Professional Misconduct.
One definition provides that fraud:
“includes any intentional or deliberate act to deprive

another of property or money by guile, deception or
other unfair means.”
Source: Fraud Examiners Manual “Law, The Law Related to Fraud” – The Association of
Certified Fraud Examiners (1998)
Conduct
MISREPRESENTATION –
Misrepresentation of a material fact is another type of

Professional Misconduct. The gist of material
misrepresentation is deliberately making a false
statement to induce the intended victim to take a
desired course of action.
Conduct
MISREPRESENTATION – can be defined as “the act of

representing improperly or imperfectly or giving a
false impression. A misrepresentation is any untrue
statement of a fact or any statement that is otherwise
false or misleading” – Standard IV (B.6)
Conduct
MISREPRESENTATION:
When considering misrepresentation, one should establish that the

following occurred:
• a material false statement,

• knowledge of its falsity,
• reliance on the false statement by the victim, and
• damages suffered
Conduct
MISREPRESENTATION
or
CONCEALMENT
Is there really a difference?
Conduct
MISREPRESENTATION or CONCEALMENT
Misrepresentation differs slightly from Concealment of

material. The difference between the two concepts is
that in the concealment of a material fact, the person
concealing the fact had:
“a duty to disclose the material fact and failed to do so”

Conduct
CONCEALMENT OF MATERIAL FACT
In Concealment “the duty to disclose usually depends on the

relationship between the parties. Those people who occupy a
special relationship of trust, such as the officers or directors of a
corporation, an attorney, accountant, trustee, stockbroker or
other agent, may be found to have a duty to fully and completely
disclose material facts to the parties who rely upon them”
Source: Fraud Examiners Manual “Law, The Law Related to Fraud” – The
Association of
Conduct
If Misrepresentation differs slightly from Concealment

where does Deceit fall?
Should these concepts be separated?
Conduct
The ‘avoidance of professional misconduct’ has

implications not only for the person or persons
involved but also for their employers and by extension
the industry in which they operate.
Lawyers and Politicians, for whatever reasons, are the

butt of most antidotes about professional misconduct.
Conduct
Avoiding Professional Misconduct depends on the

moral fiber of the individual. Personal integrity is an
important factor.
It is important not only to ‘talk the talk’ but more

importantly to ‘walk the walk.’
Conduct
PROFESSIONAL MISCONDUCT
A dishonest mind is fertile ground on which to breed

professional misconduct. Cleanse your mind by
cultivating high
ethical standards and
respect for the law.
PRESERVATION OF CONFIDENTIALITY
“Members shall preserve the confidentiality of

information communicated by clients, prospects, or
employers concerning matters within the scope of the
client-member, prospect-member, or employer-
member relationship unless the member receives
information concerning illegal activities on the part of
the client, prospect or employer.” – Standard IV (B.5)
PRESERVATION OF CONFIDENTIALITY
Confidentiality centers around information and

the dissemination and or use of that information.
As an ethical standard this can be very
problematic. Confidential information is generally
non-public by nature.
Some companies mandate that employees sign

a ‘confidentiality agreement’ which oblige them
to keep certain information confidential.
Conduct
PRESERVATION OF CONFIDENTIALITY (cont’d)
Problems arise since there can be at least three

parties with interest in the ‘confidential’ information.
Confidential information may be:
• Company related – trade secrets, strategies etc
• Client related – personal data, trading history
• Market related – pending M&A, poor results
Conduct
Regardless of the category that the confidential

information falls in, it is generally not readily available
for public consumption.
In the financial/financial sector there is an expectation

that persons privy to confidential information will
treat it as such.
Conduct
Non-public price sensitive information:

• Trade secrets and practices (sometimes referred
to as ‘confidential’ or ‘classified’ information) –
are those practices or processes used by a
company to gain a competitive advantage over its
competitors .
Note: It can be duplicated if ‘discovered.’
Conduct
Non-public price sensitive information:

• Investment Strategies (Company’s and or Clients)
are the rules or tactics that are used by either, the
company through its representative on the one
hand and the client on the other hand to guide
investment selection.
Conduct
Non-public price sensitive information can also be a

‘discovery’ about internal operation(s) OR the
activities of individual/individuals at the company
that give rise to questions about ethical standards
and professional conduct.
Conduct
The real scourge and problem associated with

confidential non-public information is the
possibility that it can be the basis for illegal
‘insider trading’ or other economic activities.
Conduct
PROFESSIONAL INDEPENDENCE AND OBJECTIVITY
This requires the use of:
“reasonable care and judgment to achieve and

maintain independence and objectivity in making
investment recommendations or taking investment
action.” – Standard IV, A3
Conduct
RESPONSIBILITY TO EMPLOYERS
Requires that employees do “not undertake any

independent practice that could result in
compensation or other benefit in competition with
their employers unless they obtain written consent
from both their employer and the persons or entities
for whom they undertake independent practice.”
– Standard III B – Duty to Employer
Conduct
RESPONSIBILITY TO EMPLOYERS (cont’d)
Extends beyond personal responsibility if you are a

Manager or Supervisor. “Aiding and Abetting or
Criminal Facilitation?”
The responsibilities of being a Manager or Supervisor

mean you should, regardless of how unpopular we will
become, ignore the popular Jamaican parlance:
‘informah fi dead’.
Conduct
RESPONSIBILITY TO CLIENTS
Clients depend on their providers to

deliver quality Service.
Quality service includes among other things that, they

receive the best available information, advice and
recommendation on which to make investment
decisions.
Conduct
RESPONSIBILITY TO CLIENTS (cont’d)
Clients expect that their financial adviser will act in

their best interest. In that regard, recommendations
provided must take into consideration among other
things the client’s expectation. This can be a serious
challenge.
How should the adviser act if a client and his employer
have the same interest in a particular stock or
investment?
Conduct
Performance Presentation
“ Members shall NOT make any statements, orally or

in writing, that misrepresent the investment
performance that they or their firm have
accomplished or can reasonably expect to achieve”
Conduct
“ If members communicate individual or firm performance

information directly or indirectly to clients or prospective
clients, or in a manner intended to be received by clients or
prospective clients, members SHALL MAKE every reasonable
effort to assure that such performance information is fair,
accurate and a complete presentation of such performance.”
Conduct
“Transactions for clients and employers shall have

priority over transactions in securities or other
investments of which a member is the beneficial
owner so that the personal transactions do not
operate adversely to their clients or employer’s
interest” – Standard IV (B.4) Priority of Transaction
Conduct
Benefits of Ethical Standards:
The higher the ethical standards and level of

professionalism showed by employees, the better it
is for everyone:
• more satisfied clients
• more business
• bigger profits
• greater job security for employees
• more prosperous economy
Conduct
FUNDAMENTAL RESPONSIBILITIES
Members shall:
A. Maintain knowledge of and comply with all applicable laws,
rules, and regulations (including AIMR’s Code of Ethics and
Standards of Professional conduct) of any government,
governmental agency, regulatory organization, licensing
agency, or professional association governing the member’s
professional activities.
B. Not knowingly participate or assist in any violation of such

laws, rules, or regulations.”
Source: AMIR Standards of Practice Handbook – Seventh Edition (1996)
Conduct
FUNDAMENTAL RESPONSIBILITIES (cont’d)
“ Once you compromise your values by agreeing to

take bribes or payoffs, it is difficult to reestablish your
reputation or credibility”.
Source: Knowledge@Wharton.com “Winners Never Cheat: Lessons for Today’s Business

Leaders” – June 1, 2008

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Introduction to

Ethics and Professionalism

A Guide to sound ethical and professional practice

Presented by Robert Hamilton

This course is designed to provide an

Students are strongly urged to practice the

• Recognize the importance of ethics and

• Identify areas of weakness in ethics and

• Be able to provide a list of acceptable

• Create a personal Code of Ethics and Conduct

Emphasis will be directed in the following areas:

Supporting Text: Ethics and the Conduct of Business (Fifth Edition)

The Association for Investment Management and Research (AIMR)

One of the first acts of the AIMR was the adoption of

1. Ethics “a body of moral principles or

2. Ethics are “moral beliefs and rules

WHAT ARE THE MAIN FACTORS THAT DIRECT

• The Law and other regulations

Source: Fraud Examiners Manual “Criminology, Fraud Prevention Programs” – Association

• DO LEGAL STANDARDS ESTABLISH ETHICAL

“ Ethical people measure their conduct by basic

Source: Fraud Examiners Manual “Criminology,

The first step in defining this concept is to consider

A profession is “a type of job that requires special

For the word conduct apply the meaning ‘behavior’

Do we really need ethical standards

• Placing assets in the hands of other people requires immense

• Financial scandals shock us because they involve people or

Source: Ethics and the Conduct of Business-Fifth Edition

Relevance in the Political Sector

Former Government minister Francis Tulloch says

“Under the 2000 Corruption Prevention Act, public

What does this mean in respect of the ethical and

If we had more police personnel who were content

“..any professional conduct involving dishonesty,

PROFESSIONAL MISCONDUCT (cont’d)

• some types of professional misconduct may

• should not be justified because of

• is frowned upon by honest ‘well thinking’ people

PROFESSIONAL MISCONDUCT (cont’d)

• MISREPRESENTATION (of material fact)

• CONCEALMENT OF MATERIAL FACTS

“includes any intentional or deliberate act to deprive

Misrepresentation of a material fact is another type of

PROFESSIONAL MISCONDUCT (cont’d)

MISREPRESENTATION – can be defined as “the act of

Source: AIMR Standards of Practice Handbook – Seventh Edition (1996)

When considering misrepresentation, one should establish that the

• a material false statement,

PROFESSIONAL MISCONDUCT (cont’d)

Is there really a difference?

PROFESSIONAL MISCONDUCT (cont’d)

Misrepresentation differs slightly from Concealment of

“a duty to disclose the material fact and failed to do so”

CONCEALMENT OF MATERIAL FACT

In Concealment “the duty to disclose usually depends on the

PROFESSIONAL MISCONDUCT (cont’d)

If Misrepresentation differs slightly from Concealment

Should these concepts be separated?

PROFESSIONAL MISCONDUCT (cont’d)

The ‘avoidance of professional misconduct’ has

Lawyers and Politicians, for whatever reasons, are the

PROFESSIONAL MISCONDUCT (cont’d)