Ethics and Trust in the Investment Profession

Stakeholders are individuals or groups potentially impacted by decisions made within the investment industry. They include clients, colleagues, employers, and the broader financial community.

Ethical principles are the beliefs about what is acceptable or forbidden behavior. They guide individuals and communities in making decisions that consider both personal character and the consequences of actions on others.

A code of ethics is a formal document adopted by organizations to outline values and expected behaviors. It serves as a guideline for acceptable behavior and helps in establishing trust and professionalism within a community.

Standards of conduct are specific behaviors required by a community, serving as benchmarks for minimally acceptable behavior. They clarify and enforce the code of ethics.

Professionalism in investment management involves adhering to ethical standards, possessing expert knowledge, and maintaining a commitment to serving clients' best interests, thereby fostering trust and respect in the profession.

A set of moral principles and standards of conduct that guide the behavior of professionals and ensure accountability and integrity within a profession.

The conduct, aims, or qualities that characterize a professional person; involves adherence to ethical standards, continuous learning, and a commitment to serve the best interests of clients and the public.

Established through a combination of high ethical standards, professional conduct, and continuous development to ensure that professionals act in the best interests of clients and society.

Ongoing learning and training required to maintain and enhance professional competence, ensuring that professionals stay current with changes in their field and adhere to ethical standards.

As a professional body, the CFA Institute sets high standards of ethics, education, and professional excellence, aiming to lead the investment profession globally and promote integrity and competence among its members.

This is a common behavioral bias where individuals overestimate their ethical standards or moral behavior, particularly in unfamiliar situations. This bias can lead to poor decision-making as it may cause a person to overlook important considerations needed for ethical decisions.

These are external factors, such as environmental or cultural elements, that significantly impact our decision-making and behavior. Situational influences can lead even ethically minded individuals to act unethically under certain circumstances. Recognizing these influences is crucial for ethical decision-making.

The content distinguishes between ethical and legal standards, noting that while laws often embody ethical actions, legal and ethical conduct are not always synonymous. Some actions may be legal but not ethical and vice versa, highlighting the complexity of ethical decision-making in professional environments.

Ethical standards are based on societal moral values and expectations, aiming for the highest good for stakeholders. Legal standards are formal regulations enforced by legal authorities. While there is often a significant overlap, not all legal actions are ethical, and not all ethical actions are legal.

Civil disobedience and whistleblowing are cited as examples where ethical behavior may conflict with legal standards. These acts, while potentially illegal, are often driven by higher ethical motives and can be seen as morally justified despite legal prohibitions.

Laws may lag behind market practices, be reactive rather than proactive, and vary by jurisdiction, which can lead to inconsistent ethical practices. Laws are also subject to interpretation and can inadvertently create opportunities for unethical behavior.

Ethical frameworks guide individuals in making decisions that align with both personal and professional ethical standards. These frameworks help bridge the gap between codified laws and the broader ethical principles that guide behavior in the absence of specific rules.

Ethical standards may differ from legal standards, where ethical behavior might sometimes be illegal, such as in cases of civil disobedience, and legal behavior might not meet higher ethical standards.

A structured process that guides investment professionals through identifying relevant facts, stakeholders, and ethical principles, considering situational influences and alternative actions, and reflecting on the decisions made to ensure they align with ethical standards.

Real-world application of the ethical decision-making framework involves analyzing specific scenarios to identify ethical dilemmas, evaluate alternatives, and make decisions that align with both ethical principles and professional responsibilities.