Module 2: Ethics and Regulation Chapter 2

Question 1

Trust

Answer 1

Trust is essential to the functioning of the investment industry—trust in the behaviour, actions, and integrity of participants in the financial markets. Trust depends on participants complying with rules and acting ethically.

Question 2

Rules

Answer 2

Are helpful but are unlikely to cover every situation encountered. In the absence of clear rules, ethical principles can help guide decision making and behaviour

Question 3

Ethical reasoning and decision making

Answer 3

Become more important as increased

opportunities for ethical dilemmas arise in increasingly complex expanding and globally interconnected financial markets

Question 4

A culture of integrity, at a business or personal level, can be built using a four step process:

Answer 4

1) Set high standards and put them in writing
2) Get adequate and ongoing professional and ethics training
3) Assess the integrity of individuals and groups encountered
4) Take action when integrity breaches are observed

Question 5

Fundamental ethical and professional principles applicable to the investment
industry include the following:

Answer 5

● Make client interests paramount.
● Exercise diligence, reasonable care, and prudent judgment.
● Act with independence and objectivity.
● Avoid or disclose conflicts of interest.
● Make full and fair disclosure.
● Engage in fair dealing.
● Protect confidential information

Question 6

All employees in the investment industry should act with integrity;

Answer 6

Use competence, diligence, and reasonable care; act respectfully and ethically; and use
independent judgment.

Question 7

Benefits of ethical conduct in the investment industry are many but begin with trust.

Answer 7

Increased trust in the fairness of financial markets and the ethical conduct of market participants leads to increased market participation. Increased
market participation leads to increased liquidity, increased market efficiency, and increased availability of capital at a reduced cost. As a result, the overall
economy thrives.

Question 8

A framework for ethical decision making, such as the one listed here, can help individuals make ethical decisions:

Answer 8

1) Identify the ethical issue(s) and relevant duties and obligations.
2) Identify conflicts of interest.
3) Get the relevant facts.
4) Identify applicable ethical principles.
5) Identify factors that could be affecting judgment.
6) Identify and evaluate alternative actions.
7) Seek additional guidance.
8) Act and review the outcome.