Ethics on Cfa

Topics: Ethics, Ethical code, Professional ethics Pages: 8 (2405 words) Published: February 24, 2013

Five Key Concepts of IFP Code1
Comparison between IFP & CFA Codes3
Similarity between IFP & CFA Codes3
Difference between IFP & CFA Codes4
Why do Professionals Breach Codes4
Internal Factors5
External Factors6

The code of ethics is a foundation of a civilized society. Different industries, as the product of social division of labor, require its own professional conduct. It is known that financial market, due to its particular characteristics, has a high incidence of economic crime. That’s why in some countries requirements for the financial sector are as stringent as civil servant has. Friedman (1970) once claimed that under the control of legislative regime, a free market system should operate effectively and avoid misconduct. However, it is argued that legislation as a direct way to regulate individual’s behavior is not that sufficient and successful. Brien (1998) suggested that enforcing the code of ethics indirectly by a self-regulated model can complement some shortcomings of legislation.

Ethics here not only refers to the behavior conduct, but also the industry’s commitment to social responsibility and duty. The code of ethics is crucial to maintaining a global sustainable investment market, which means keeping a healthy relationship between employers and employees, as well as the orderly operation of financial institutions in a stable, long-term perspective.

In this essay, I will first explain the five key concepts of ethics applied by the Institute of Financial Planners (IFP), then point out the similarity and difference between IFP and CFA’s ethics code. The third part will focus on some kinds of misbehavior which might lead to any breach, and discuss to what extent employers are responsible for these factors. Five Key Concepts of IFP Code

Integrity requires IFP member to act honestly and respect the code with his/her heart really and truly. The information disclosed by the IFP member should not be a fraud. One has to treat his/her clients in a fair and professional way, and try to develop the trust with each other instead of hold the prejudice against someone. IFP members have to be brave enough to voice disagreement when he/she finds it is really wrong, instead of hiding the misconduct. Do not intentionally distort investment analysis, suggestions, actions or other professional activities.

Objectivity asks all IFP members to think independently and impartially, which indicates one should put client’s interest before personal interest when considering the invest activities, and always remember to protect and maximize the client’s interest. It is crucial to professional conduct. If there is a potential conflict, IFP requires its members to disclose it as early as possible. The decision making process and investment advice given by the members should under reasonable care and independent professional judgment regardless of the way of reward.

Competence encourages IFP members to maintain learning and keep highly competitive, as well as to give suggestion or do the business in which he/she has a certain degree of expertise. It also motivates members to improve professional skills in other areas. One should not undertake work in which he/she has little experience, unless under the guidance from other competent men.

Confidentiality suggests IFP members promise to keep a secret and protect client’s privacy unless there is signal of offense in law. Under that circumstance, he/she has the duty to reveal the relevant information. In other cases, only allowed by the clients can he/she make an announcement, but never can he/she use or tend to use such information to benefit him/herself, as well as a third party. Courtesy requests its member show respect to other members and build a healthy relationship with other professions or clients. Behave him/herself in an appropriate manner and tell partners or superiors...
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