Question

Explain what does Ethical Conduct mean? What does it mean in the financial services context? How it is different from law and regulation?

Answer 1

Ethical conduct refers to acting in a manner which is in line with the principles and values of the society, which includes respecting other peoples, having a sense of morality and ethics while dealing with other people, be they smaller or higher than you in status etc. Ethical conduct is basically moral principles and philosophy through which a individual is driven.

In financial service sector, the role of ethics is even higher, because of the various scandals that has emerged in the sector in previous years. The role of managers and business leaders while making business decisions were questioned a lot in the recent times Ethics in finance would mean acting in an ethical manner where there is opportunity to have personal benefit at the cost of company, society etc. For example, if a employee working in a listed financial sector company receives information about bad result of company ahead of its official announcement, then the same is test of his ethical standards and conducts. One could easily benefit from such situation, but maintaining ethics and morals in such situation is what is known as good ethical conduct.

Law is a set of rules and regulations which are created by an appropriate authority. The same is made for the purpose of regulating human behavior and actions. The authority has the power to enforce the rules and regulations prescribed but such is not the case with ethics and ethical standards. Ethical standards is something which comes from inside as to what is good and what is bad, there is no authority which will enforce such ethical standards on an individual nor the individual will be penalized for non compliance. Law is rules, while ethics is guidelines. Law is usually published in writing, while ethics are abstract.