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Ethics for the Financial Industry

Ethics is a study about morals. Every profession has its own set of morals that must be adhered to. This is to ensure that all professionals offer the best services.

A finance code of ethics informs professionals about rules and operating procedures that they must follow to comply with industry standards, corporate policies and government requirements. Ethics rules vary depending on role, industry, company size and transaction. Some professionals (such as public accountants) must meet annual minimum ethical requirements to maintain active licenses.

The code of ethics for finance professionals serves to promote transparency and honesty. It is used alongside an organization’s code of conduct.

The purpose of this Code of Ethics for Finance Professionals is to promote honest and ethical conduct and compliance with the law, particularly as related to the maintenance of the firm’s financial books and records and the preparation of its financial statements. The obligations of this Code of Ethics for Finance Professionals supplement, but do not replace, the firm’s Code of Conduct. As a finance professional of the firm, you are expected to:

Engage in and promote ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, and to disclose to the Office of the Secretary any material transaction or relationship that reasonably could be expected to give rise to such a conflict.

Carry out your responsibilities honestly, in good faith and with integrity, due care and diligence, exercising at all times the best independent judgment.

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Talking about of code of ethics and code of conduct could lead to the question of which is which. Why should we have a code of conduct when we already have the code of ethics which is the grand pupa of all codes? At this point it is important to clarify what each code does.

Code of Ethics

A code of ethics is a document, usually issued by a board of directors that outlines a set of principles that affect decision-making. For example, a code of ethics might stipulate that XYZ Corporation is committed to environmental protection and green initiatives. The expectation is that individual employees, when faced with the option, will select the greenest solution. The Caux Roundtable, a business-ethics think tank, argues for codes of ethics by noting that, "The self-interested pursuit of profit, with no concern for other stakeholders, will ultimately lead to business failure and, at times, to counterproductive regulation. Consequently, business leaders must always assert ethical leadership so as to protect the foundations of sustainable prosperity."

Code of Conduct

A code of conduct typically is issued by a board of directors; however, it outlines specific behaviors that are required or prohibited as a condition of ongoing employment. A code of conduct might forbid sexual harassment, racial intimidation or viewing inappropriate or unauthorized content on company computers. These are rigorous standards that usually are tightly enforced by company leaders. Ethics consultant Cornelius von Baeyer notes that, "There is considerable information that codes, along with other measures, have helped pull some companies out of the morass of scandal, and have helped many companies build a healthier work climate and reputation."

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There are those who argue that the financial industry does not need a code of conduct but it only needs the code of ethics. This is because conduct depends on context but good morals are applicable everywhere.

A code of conduct will not make a person behave ethically, but a code of ethics might, an ethics expert with over 20 years' experience says.

And it provides a valuable framework for dealing with offenders against it.

Brian Moran, co-principle of Managing Values, told LeadingCompany that ethical breaches are increasingly judged as a business risk.

"Increasingly companies are tying ethics to risk," he says. "That is interesting because risk is seen as a hard system. In the past, people have tended to think codes of ethics as wooly and esoteric, classic 'feel good' documents."

Many leaders have been too slow to catch up with the notion of the "court of public opinion", he says. Ethics are determined by society, and companies that fail to act speedily will find society makes up its own mind. Social media means that such judgments can be swift, harsh and difficult to reverse.

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