Professional Ethics at the NRS Compliance Conference

These are my notes from the NRS Fall Compliance Conference.

Dorothy (Dot) C. Kelly, Director, Training & Outreach for the Professional Conduct Program, CFA Institute
Wendy L. Pirie, Director, Curriculum Projects, CFA Institute
Robert Stirling, Senior Consultant, Investment Adviser Services, NRS

According to the 2013 Edelman Trust Barometer, the Financial Services industry is the least trusted industry globally. Only 46% trust the financial services industry to do the right thing.

THE GOAL OF ETHICS EDUCATION
•To recognize that ethical issues are a normal and predictable part of life.
•To build upon a culture of compliance and develop a culture of ethical decision-making.
•To discuss approaches for dealing with ethical issues.

Economist Intelligence Unit Report: A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services
Key Findings:
• 91% of financial executives support the notion that aspiring to a globally recognized set of ethical standards would make the financial services industry more resilient.
• 53% of financial services executives say strictly adhering to ethical standards inhibits career progression at their firm.

LAW versus ETHICS

Law: a clearly defined set of enforceable rules that applies to everyone. It represents a minimum level of expected conduct that everyone must observe. (CAN YOU?)

Ethics: address situations not covered by the law (relations with competitors, interpersonal relations at work) and also contributes to the creation of laws. (SHOULD YOU?)

FUNDAMENTAL ETHICAL PRINCIPLES

– Place client interests first
– Maintain independence and objectivity
– Avoid/manage conflicts of interest
– Make full and fair disclosure
– Preserve confidentiality
– Deal fairly
– Reasonable care & prudent judgment
– Maintain integrity of profession
– Promote integrity of capital markets

A FRAMEWORK FOR ETHICAL DECISION-MAKING

Identify the Issue(s):

• Duties/Obligations
• Conflicts of Interest
• Relevant Facts
• Ethical Principles

Consider:

• Situational Influences – External & Internal
• Alternative Actions
• Additional Guidance

Then Act and Reflect.

WARNING PHRASES:

-Everybody else does it, so it must be okay.
-That is the way they do it at Firm X.
– If we do not do it, someone else will.
-This is the way it has always been done.
– It doesn’t really hurt anyone.
– It’s not a big deal.
– It’s not my responsibility.
– I want to be a team player; l want to be loyal.