Integrity Ethics Flashcards
Define integrity
Making a decision because it is the right thing to do, rather than because it’s what is expected
What are the reasons for unethical behaviour?
- The pressure of short term gains (for the business)
- Belief that it is worth the risk (for oneself)
- Lack of awareness of regulations
How should actions be prioritised in terms of the parties that are affected?
Client first, firm second, self third
What does FCA stand for?
Financial Conduct Authority
What does the FCA mean by ethical behaviour?
Honesty, reliability, impartiality, openness
What is the most effective way of encouraging ethical behaviour?
Ethical awareness
What is an agent?
A contractual relationship where one party hires or engages another party to act on their behalf in transaction with a third party.
What is a principal?
A person who enlists the services of another
What are the duties of the agent?
-Obey instructions
-Exercise skill and care
-Act in person (do not delegate)
-Keep accounts
-Act in good faith (act for principals benefit, disclose conflicts of interest)
What is fee based compensation?
Charging clients based on a percentage of their assets - increased compensation through growing their portfolio
What is commission based compensation?
Compensated on each transaction regardless of gains or losses
What is a warning sign of a bad financial advisor?
Flashy behaviour- flamboyant office, uses lots of industry jargon
What are the stakeholder benefits of good ethics?
-Market confidence
-Consumer protection
-Reduced financial crime
-Public awareness and confidence
What is a compliance based approach?
Acting within the letter of the laws and regulations
What is an integrity based approach?
Combination of a concern for the law and an emphasis on managerial responsibility
