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Flashcards in Section 13 Deck (9)
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1

Ethics

•The application of ethical values to business decisions
•Ethics is at the heart of financial services legislation
•All FCA rules and guidance relate back to over-arching principles - founded on ethics

•Ethical standard of behaviour included in Senior Managers and Certification Regime (SM&CR)
o Greater emphasis on responsibility and accountability
o New standards of conduct, assessment, overseeing of delegated work and protection of whistle-blowers who can report to own firm/directly to FCA whistle-blowing team

2

Business Benefits

•Builds trust
•Strengthens relationships
•Reinforces professional status
•Profitability

3

Ethical Issues in Financial Services

•Commission driven mis-selling
•Unclear and overly technical documentation
•Sources of remuneration and use of inducements
•Conflicts of interest/sale of unsuitable products
•Inadequate handling of complaints

4

Regulatory Initiatives

•Principles-based regulation introduced
o Fairness
o Vulnerable consumers
o Access to insurers
o Data ethics

5

Ethics culture

•4 key components
o Leadership – tone from top
o Practices – tell people what to do to be successful
o Narratives – tells people what the firm is trying to achieve
o Capabilities – how equipped people are to be ethical

6

Ethics into Practice

•Ethical framework can be summarised as:
o Commitment – statements of values / code of ethics
o Leadership – tone from top
o Operational – employee tool-kits
o Oversight – monitor and review

7

Ethics Codes and Values Statements

Embedding Ethics

Leadership

Operational Steps

Governance, Risk Management and Compliance

Effective Oversight

Evaluation and Outcomes

Ethics Codes and Values Statements
•Sets out firms’ commitment to ethics
•Firms often have values statements and ethics codes that reflect their corporate culture

Embedding Ethics
•Has to be practised at all levels within business
•Ethical leadership is the starting point

Leadership
•Understand language of ethics
•Craft clear ethical vision
•Shape the way people make decisions
•Remove hurdles
•Lead by example

Operational Steps
•Tools to help a business embed ethics:
o Policies
o Procedures
o Training
o Job descriptions
o Human resources
o Communications
o Performance management

Governance, Risk Management and Compliance
• An important part of an ethical framework is effective oversight
o Governance
o Risk management
o Compliance
o Internal audit

Effective Oversight
• Codes of ethics and values statements
• Ethical leadership
• Operational initiatives
•Governance, risk management and compliance

Evaluation and Outcomes
•According to the regulator, management information relating to the fair treatment of customers (FTC) should be:
o Accurate
o Timely
o Relevant
o Consistent
•Examples of MI:
o Sales volumes
o Policy lapses/cancellations
o Complaints
o File reviews
o Business mix

8

Outcomes

•MI should focus on how much a firm is delivering the expected FTC outcomes

9

Stakeholders and Corporate Social Responsibility

•Business success relies on all kinds of people - the stakeholders
•On-going engagement - continual feedback from key partners (corporate social responsibility)