Ethical Issues in the Financial Services Industry, Second Edition

This second edition of Ethical Issues in the Financial Services Industry examines the factors that contribute to why the insurance and securities financial services industry is facing increasing scrutiny of its ethical practices and responsibilities. These concerns are fueled by the inherent conflict of interest between sellers and buyers and the evolving complexity of the products we sell. While our actions are subject to federal and state rules and regulations, the ethics of our business depends on the individual behavior of millions of financial services professionals. FINRA and other self-regulatory organizations, individual firms, and most recently, Regulation Best Interest, all influence how we treat our clients. Yet to foster high standards of ethical behavior and just and equitable principles of trade, financial professionals must be able to consciously (and habitually) recognize ethical situations and make the proper choices. This course discusses the current regulatory environment, the behavior expected of professionals, and presents 13 scenarios to demonstrate how financial professionals can choose to conduct themselves along a range of ethical behavior. Each case lays out the backgrounds of the humans who depend on the ethics of the industry—and then dissects the ultimately selfish choices of the individual financial professional. Learning Objectives: Define ethics and discuss how conflicts of interest and complex transactions make ethical behavior difficult; Identify efforts to regulate ethics in the financial industry by government, FINRA and other self-regulatory organizations, and individual broker-dealer firms; Identify efforts to regulate ethics in the insurance industry by state insurance departments, individual insurance companies, and professional organizations; Discuss ethical issues in a variety of situations by reviewing scenarios featuring specific financial products and customer needs: Inappropriate replacement of mutual funds; Replacing existing life policy based on unrealistic current value projections; Sale of an equity index annuity by an uninformed salesperson; Replacing an older client’s poorly performing mutual fund shares with a new VA; Sale of a very aggressive mutual fund to a risk-averse investor; Selling a high-bonus-rate fixed annuity without revealing policy caveats; Touting a secondary, no-lapse universal life policy to young insurance buyers without explaining policy limitations; Misrepresenting oneself as an independent practitioner; Buying new insurance without required disclosure of existing coverage; Financial planner attempting to clinch a sale through company-bashing; Financial planner attempting to close a sale through agent-bashing; Sale of variable life & annuity products, explaining investment in the contracts as equivalent to mutual fund investments and omitting contract caveats; Selling inappropriate insurance coverage to a customer.