Ethics in the investment industry

Published on July 30, 2020   11 min
Hello, and welcome to the first lecture in the CFA or Chartered Financial Analysts series for Henry Stewart Talks. I'm professor Michael McDonald. I'm a professor of finance at Fairfield University in Fairfield, Connecticut. Today I'd like to talk to you about one important area of the investments field focused in particular on ethics. Now, if you're interested in taking the CFA exam, you'll certainly need to know about ethics, and ethical representations within the investments field. But even if you're not interested in taking the CFA exam, ethics are still a critical area that you want to be aware of. Let's dive in and get started, shall we?
What exactly are ethics? Well, different people have different definitions certainly, and that's fair. Ethics is something that's subjective but on the whole, it's important to understand that we talk about ethics, they're critical to the investments industry. The CFA defines ethics as acting with integrity, competence, dignity, respect, and in an ethical manner with public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets. Now that's quite a mouthful, but what they're really saying is that you've got to treat other stakeholders within the business, whether they're clients, whether they're employers, whether they're colleagues, you've got to treat everybody essentially in an honest and upfront manner. This is particularly important because when talking about the investments field, the reality is that investments are intangible for the most part. If I buy a stock or you buy a bond or we buy an options contract or a foreign currency forward or something similar, we never actually see any of those things. These days, nobody gets stock certificates in the mail. We don't get a paper version of our bond. Instead all we see are numbers on a computer screen. The reality is that if we can't trust the investment professionals that we're working with, whether we're a customer, whether we're an employer, whether we're dealing with colleagues, if we can't trust the other people in the investments industry, then the whole investments field falls apart. Because you wouldn't put any money into an intangible investment that you can never touch, can never see if you don't trust the people you're working with. That's why ethics is a core foundation in the investments Industry. Without it, the industry doesn't work at all.