What is Ethics?
In every society, there are some forms of conduct which are
considered proper and others which are deemed improper. Ethics
is about determining which forms of conduct are proper.
In order to decide whether a given conduct is proper, we need
a yardstick. In everyday life, the yardstick is provided by our values,
which are our fundamental beliefs. Societies recognise their most
important values as laws. The practical effect of recognising a value
as a law is that its breach is officially sanctioned and punished.
Ethical Conduct in the Securities Industry
In the securities industry, ethical conduct is governed by the
requirements of securities legislation. These requirements are
rooted in the specific realities of the industry, in particular, the
overarching need for trust. The securities industry cannot function
unless clients are confident that their advisers are trustworthy—
that they are honest and have the client’s interests at heart.
Why does ethical conduct matter? First, it is a prerequisite for
being allowed to work in the industry. In order to be registered (or
continue to be registered) as a dealer or a dealer’s representative,
Equally important, ethical conduct is a business imperative.
In an industry where trust is paramount, ethical conduct makes
plain business sense. It provides dealers and representatives with
an advantage over competitors with lower standards.
The Standard of Conduct in Securities Legislation
We said that ethical conduct in the securities industry is
governed by the requirements of securities legislation. To be
specific, registrants must observe:
• first, a principles-based standard of conduct
• secondly, specific business conduct requirements, such as
know-your-client and know-your product
By Andre Fok Kam, CA, MBA