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What are Ethics?

What are Ethics?. Ethics : The moral standards by which people judge behavior. Ethics can be summarized by the “golden rule” – “Do unto others, as you would have them do unto you .”.

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What are Ethics?

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  1. What are Ethics? Ethics: The moral standards by which people judge behavior. Ethics can be summarized by the “golden rule” – “Do unto others,as you would have them do unto you.” Business Ethics: The moral values that guide the way corporations or other businesses make decisions. Ethics are the structured examination of how institutions and individuals should behave in the world of commerce. Example: A portfolio manager must give the same consideration to the portfolio of family members as the portfolio of small, individual investors.
  2. Why are Ethics Important?
  3. Ethics vs. Law
  4. Fiduciary Responsibility Financial service professionals have the responsibility to put the interests of their clients and customers above their own interests. This means that professionals must work for their clients when making investment decisions. They have to act objectively to ensure the best advice is given. The word fiduciary comes from the Latin word meaning “trust.” It is paramount for financial professionals to maintain their clients’ trust and act in their best interest.
  5. Example: Financial professionals need to base their recommendations on customers’ individual needs, investment timeline, age, and other information to choose investments that are best suited for their situation. Financial professionals should NOT base their recommendations on products that have the highest commission associated with the sale.
  6. Types of Ethics Utilitarian Ethics Makes decisions that create the best solutions for the most people. Another way to distinguish this type of ethics is asking if “the ends justify the means.” An action is “right” if more people will benefit from it than will not benefit from it. Kantian Ethics This type of ethics is derived from philosopher Immanuel Kant. Under Kant’s view, an action is only right if no one is hurt or negatively affected in the decision process. Every individual must be taken into account during the decision-making process.
  7. Corporate Responsibility The ethical standards set forth by an individual firm. Generally, a firm will put in place a proxy statement outlining the ethical standards it will adhere to. These standards usually include making decisions with the best interest of their clients, shareholders, and the community in mind. Corporate Responsibility also creates standards for ethical practices between employees (fair hiring, non-harassment, etc.).
  8. Why are Ethical Business Practices Hard to Maintain in the Financial Industry?
  9. Case Studies: Ethics in Finance ENRON The Smartest Guys in the Room Trailer: http://www.youtube.com/watch?v=1dNZaKLjYbc
  10. Case Studies: Ethics in Finance Bernard Madoff Operator of the largest Ponzi scheme in US history. Ponzi Scheme: A fraudulent investment operation where investors’ money is used to pay other investors. In essence, money is shuffled around while the runner of the Ponzi scheme greatly exaggerates the gains from the operation. Madoff fabricated gains to his investors of approximately$65 billion when his investors had actually lost a total of $18 billion. Sentenced to 150 years in prison and forced to forfeit over $17 billion in March 2009. It is often described as a pyramid scheme.
  11. Ponzi Scheme
  12. Case Studies Marc Dreier Unraveled Trailer: http://www.youtube.com/watch?v=r7oRSYgx9QU
  13. Careers in Financial Markets
  14. Careers in Financial Markets 1. Commercial Banks
  15. Careers in Financial Markets Examples of Commercial Banks are Bank of America, JP Morgan Chase and Wells Fargo.
  16. Careers in Financial Markets 2. Investment Banks: Financial Institutions that are major purchasersof financial instruments. Investment banks are involved in both the “buy” and “sell” side transactions in financial instruments (example: Goldman Sachs). Salesperson: Sells financial instruments to investors (typically institutions).
  17. Careers in Financial Markets
  18. Careers in Financial Markets 3. Other Institutional Investors: Consist of both “buy side” and “sell side” institutions.
  19. Careers in Financial Markets
  20. Careers in Financial Markets
  21. What are Some Main Differences between Mutual Funds and Hedge Funds?
  22. “Sell Side” Institutions
  23. Financial Planner
  24. Treasurer The Treasurer’s Office works with Corporate Finance Associates to determine growth and financing strategies. It manages the corporation’s investment portfolio.
  25. Regulation and Compliance 5. Financial Service Regulation and Compliance: Many different positions exist at different regulatory “watchdogs” of the financial industry.
  26. Careers in Financial Markets
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