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Ro1 Regulations And Ethics Of The Finanacial System > Being Ethical > Flashcards

Being Ethical Flashcards

1
Q

What does good ethics lead to?

A

Good business.

Good customer endorsement
Loyal customers
More profits

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2
Q

What are some of the bad ethics seen in the financial services? 4

A

Miss-selling scandals - endowments, pensions, PPI.

Confusing customers by the complexity of products and high charges.

The financial crisis of 2008.

Talk of advisors being commision hungry and self-interested.

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3
Q

What changes in the financial industry have been seen over the recent years due to the reaction to bad ethics? 6

A

Removal of the FSA

Introduction of the RDR regime

Promotion of the FSCS protection for consumers

Guidance from Money Helper formally the Money and Pensions Service (MPAS)

Bribery Act 2010 requires firms to have adequate procedures to prevent bribery.

The consumer duty

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4
Q

What are the ways firms ensure ethical conduct and fair outcomes for consumers? 4

A

Code of ethics
Leadership
Implementation of ethical practice
Oversight and governace

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5
Q

What is the path to ethical maturity?

A

A journey from early stage commitment, through maturity and development to innovation.

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6
Q

What is a code of ethics?

A

A written description of the standards expected by those who subscribe to it.

Proffeisonal bodies usually develop their own, and members will be required to confirm their acceptance and commitment to them.

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7
Q

What can happen if failing to commit to the code of ethics of an organisation?

A

Withdrawal of membership

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8
Q

What will anyone wanting a statement of professional standing from the CII need to do?

A

Follow the core duties laid out in their code of ethics.

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9
Q

What are the CII core duties?

A

Agreeing to follow the code of ethics and relevant laws in full

Acting with the highest standards of ethics.

Treating everyone equally regardless of race, religion, gender etc.

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10
Q

Do firms have to use the CII code of conduct?

A

No, but most use of adapt from it especially in firms where staff require a statement of professional standing (SPS)

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11
Q

What is a statement of professional standing?

A

Illustrates that a person is qualified, maintains competence, and I’d fit and proper.

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12
Q

How is a distinction made between compliance and acting ethical.

A

Everyone in a firm may act in what they regard as ethical, but the extent to which ethical behaviour is tolerated and expected is down to management.

Minimum standards - Some firms may do just enough to get away with it.

Values led business - active implementation of ethics driven process.

The first is compliant, and the second is ethical.

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13
Q

To demonstrate their commitment to ethics, leadership should:

A

Set the vision

Ensure noses are pointing in the same direction

Examine the critical non-essentials

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14
Q

How are the ways a firm can implement ethical practices?

A

Policies and procedures
Training and competence
Recruitment
Pay structures
Job descriptions
Communications
Performance management

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15
Q

Breakdown polices and procedures in terms of implementing ethical practices.

A

Most firms have document polices.

These focus on compliance

Should be reviewed with an eye on ethics.

The size of the firm will often determine the size of the policy library.

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16
Q

Breakdown training and competence in terms of implementing ethical practices

A

From outset and ongoing. Staff should receive adequate training for their role and should know what is expected of them. Ethics will be one of the outcomes of this.

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17
Q

Breakdown recruitment in terms of implementing ethical practices

A

Due consideration should be given as to whether potential recruits have the right stuff. People who represent ethical risks may not be the right fit for an ethical company.

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18
Q

Breakdown pay structures in terms of implementing ethical practices

A

Should reward the right behaviours and not unethical ones.

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19
Q

Breakdown job descriptions in terms of implementing ethical practices

A

Good job descriptions will set out clearly what is expected from the individual. Senior staff should have clearly demarked areas of responsibility.

20
Q

Breakdown communications in terms of implementing ethical practices

A

Communicate policies and procedures.

Thus is one of the biggest areas preventing good outcomes.

21
Q

Breakdown performance management in terms of implementing ethical practices

A

Each member of staff should have personal objectives and be monitored against these objectives through the firms performance management programme.

22
Q

What is the point of governance, risk, and management (GMC) compliance?

A

What have you put in place to make sure your processes work?

23
Q

What is meat by governace?

A

how the firm is set up to monitor success criteria.

Which department will be responsible?

What information is provided to make sure things are being done right.

24
Q

Under GMC, what is risk management?

A

Ethics forming part of part of the firms standard risk management approach.

25
Q

Under GMC, what is meant by compliance?

A

Comliance ensures that the firm complies with regualtory requirements but does not mean ethical.

A second compliance function is open added to address this.

26
Q

What is a stakeholder?

A

A person with interest or concern in something, especially a business.

27
Q

What do firms often use to gauge the views of staff?

A

Staff engagement surveys

28
Q

What should firms do for shareholders?

A

Engage with them on polices which may reduce short-term profits, but long-term more sustainable gains.

29
Q

What is the process of engaging with stakeholders called?

A

Corporate social responsibility. (CSR)

30
Q

What is the process of CSR?

A

Identify stakeholders

Materiality assessment - Find out what is important to them.

Assess how the firm is performing in respect to these material factors.

31
Q

What is good CSR?

A

Moving away from ‘tell me’ and ‘show me’ to ‘groove me’

In other words, it is not good enough to say you are in an ethical firm or show good polices but instead, you should prove good things by asking the stakeholders.

32
Q

What is management information (MI)?

A

A key tool used in assessing the performance of a firm.

In advisory firms, it helps the senior management team understand the extent to which advisors are giving advice across their authorisation.

33
Q

What points are in the MI guide produced by the FSA in 2007?

A

Accuracy - The data you obtain should be accurate.

Consistency - measures uses should be consistent, and the data should be measured on a constant basis to allow comparison between time periods.

Relevance - what you measure needs to be relevant and not measured for the sake of it.

Timeless - data needs to be timely enough to be acted upon. There is no point in identifying a big trend after it has ceased to be relevant.

34
Q

What type of information would be useful for MI?

A

Cancellations
Complaints
Buisness mix

35
Q

What are the 5 steps suggested by the regualtor for MI?

A

Seen - the right people need to have sight of the data. It should be seen by those who have the power to do something about it.

Challenged - numbers can lie. What is seen from MI should be challenged to see WHY the numbers say what they say.

Analysed and monitored - should be subjected to analysis to make the right decisions

Acted upon - there is no point having information you don’t use.

Recorded - if it isn’t written down, it didn’t happen.

36
Q

What advice does the PFS give for handling ethical dilemmas?

A

Don’t rush to judgment. Find out as much as you can about what has happened.

Talk the situation through with a colleague. A problem shared is a problem halved.

Identify the ethical principles involved, also the emotions.

Find out what the PFS code of ethics says about the situation.

What does the firm’s code of ethics say about the situation.

When deciding what to do consider how it would sound across the dinner table.

Think about the consequences of making that choice and who would suffer most from it.

Make your decision and share it with those with an interest.

Think about what you can do to help avoid this happening again

Keep an eye on the after effects of your decision and reflect on whether you might have handled it differently.

37
Q

What is the PFS model good for?

A

Applying the steps required for managing ethical dilemmas.

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Ro1 Regulations And Ethics Of The Finanacial System (14 decks)

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