15.2 : Defining Ethics and What Is Ethical

Ethics in the financial and investment industry encompass the principles and standards that guide behavior, addressing moral questions of right and wrong. It goes beyond adhering to legal requirements, recognizing that actions may be lawful but still unethical, such as exploiting tax loopholes or misusing company resources.

Ethical challenges often arise in relationships between analysts and investors, employers and employees, and organizations and clients. Common issues include insider trading, biased recommendations, and poorly managed conflicts of interest. Surveys reveal broader unethical practices like data falsification and withholding information, often stemming from workplace pressures.

Ethics can be examined from three perspectives. Normative ethics provides guidelines on how professionals should act. Descriptive ethics analyzes actual behaviors, offering insights into real-world challenges. Prescriptive ethics focuses on creating environments that promote ethical decision-making.

Various ethical theories offer frameworks for understanding morality. Consequentialist ethics evaluates the outcomes of actions, often prioritizing the greater good over individual rights. Deontological ethics emphasizes universal principles like fairness, while virtue ethics underscores the role of personal character and integrity.

Ethics in finance represents fundamental values that uphold accountability, trust, and sustainable success. They transcend mere compliance to ensure professional excellence and integrity in practice.