Discretionary Power and Ethical Decision Making in Investment
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Questions and Answers

What is the main expectation regarding the conduct of a Regulated Person according to CIRO?

  • To engage in business conduct detrimental to the public interest
  • To observe high standards of ethics and conduct in business transactions (correct)
  • To disregard legal and regulatory obligations
  • To prioritize personal gains over ethical standards

    • According to CIRO, what type of business conduct would be considered detrimental to the public interest?

  • Conduct reflecting high ethical standards
  • Conduct likely to increase investor confidence
  • Negligent conduct (correct)
  • Conduct in compliance with legal obligations

    • What does CIRO expect regarding the behavior of a Regulated Person in conducting business?

  • Engage in conduct likely to increase investor confidence
  • Ignore the policies of a Regulated Person
  • Manipulate business transactions for personal gain
  • Act openly, fairly, and in accordance with just and equitable principles of trade (correct)

    • In what situation would any business conduct contravene the standards set forth by CIRO?

    <p>If it displays an unreasonable departure from expected standards</p> Signup and view all the answers

    What does CIRO expect from the representative regarding compliance with legal, regulatory, and contractual obligations?

    <p>Failure to comply with OSC regulations</p> Signup and view all the answers

    What is the duty of care that Registered Representatives (RRs) must follow to ensure suitability of investment recommendations for clients?

    <p>Honesty and good faith</p> Signup and view all the answers

    According to CIRO, what values guide individual behaviors in the context of ethics?

    <p>Honesty, fairness</p> Signup and view all the answers

    Under which rule section are the standards of care for Discretionary Accounts and Managed Accounts set out?

    <p>Rule section 3270: Discretionary Accounts and Managed Accounts</p> Signup and view all the answers

    What is the main difference between a Registered Representative (RR) and an Investment Representative (IR)?

    <p>RR can provide investment advice and take both solicited and unsolicited orders, while IR can only take unsolicited orders and cannot provide investment advice</p> Signup and view all the answers

    Which of the following best describes ethical relativists' belief about moral principles?

    <p>They do not believe in universal moral principles and place personal needs over the community needs</p> Signup and view all the answers

    What is the role of ethical managers in an organization, according to the text?

    <p>To prioritize ethical actions over profit</p> Signup and view all the answers

    When making an ethical decision, what constitutes an ethical dilemma?

    <p>If there are two or more right choices</p> Signup and view all the answers

    In ethical dilemmas involving right versus wrong issues, what makes the decision-making process less of a dilemma?

    <p>Both actions are right</p> Signup and view all the answers

    In ethical dilemmas involving truth versus loyalty, what conflict arises?

    <p>Honesty vs commitment to your employer</p> Signup and view all the answers

    What type of ethical dilemma involves the conflict between recommending different equity mutual funds based on their performance?

    <p>Truth versus loyalty dilemma</p> Signup and view all the answers

    As an investor, what type of ethical dilemma might you face when deciding whether to invest for short term or long term?

    <p>Short term versus long term dilemma</p> Signup and view all the answers

    What does CIRO expect from its Regulated Persons?

    <p>To act with high standards of ethics and conduct</p> Signup and view all the answers

    Which of the following situations may contravene the standards set forth by CIRO?

    <p>Business conduct that diminishes investor confidence in the markets</p> Signup and view all the answers

    What type of ethical dilemma might a Registered Representative (RR) face when making investment recommendations?

    <p>Deciding between disclosing or concealing crucial information from clients</p> Signup and view all the answers

    What is the main expectation regarding the conduct of a Regulated Person according to CIRO?

    <p>To observe high standards of ethics and conduct</p> Signup and view all the answers

    What action could subject a Registered Representative (RR) to disciplinary action by CIRO?

    <p>Failing to update the new account application form (NAAF) after material client changes</p> Signup and view all the answers

    What organization has regulatory power in the Canadian Securities industry?

    <p>Provincial securities commissions</p> Signup and view all the answers

    What type of license must a Portfolio Manager have to place orders to buy or sell securities without client approval?

    <p>Registered Representative license</p> Signup and view all the answers

    What is the consequence if a RR does not follow the procedures for achieving KYC (Know Your Client)?

    <p>The RR could be subject to disciplinary action by CIRO</p> Signup and view all the answers

    In ethical decision-making, the 'front page test' is used to assess the decision against what criteria?

    <p>Reputation and public perception</p> Signup and view all the answers

    In ethical dilemmas involving 'truth versus loyalty', what type of conflict arises?

    <p>End-based ethical thinking versus rule-based ethical thinking</p> Signup and view all the answers

    What is the focus of 'end-based ethical thinking' in ethical decision-making?

    <p>Maximizing benefits to the maximum people</p> Signup and view all the answers

    In ethical dilemmas involving right versus right issues, what makes the decision-making process a dilemma?

    <p>Both choices are right, but you have to choose one</p> Signup and view all the answers

    What type of ethical dilemma involves the conflict between recommending different equity mutual funds based on their performance?

    <p>Truth versus loyalty dilemma</p> Signup and view all the answers

    When facing an ethical dilemma related to short term versus long term investment, what is the main consideration for an investor?

    <p>Long term financial goals versus short term gains</p> Signup and view all the answers

    In ethical dilemmas involving truth versus loyalty, what conflict arises?

    <p>The conflict between honesty and commitment to employer</p> Signup and view all the answers

    Study Notes

    Conduct and Ethics

    • A Regulated Person is expected to conduct business in a manner that does not contravene the standards set forth by CIRO, avoiding business conduct detrimental to the public interest.
    • CIRO expects Regulated Persons to comply with legal, regulatory, and contractual obligations, and to conduct business in a manner that maintains public trust and confidence.

    Standards of Care

    • Standards of care for Discretionary Accounts and Managed Accounts are set out in Rule 1300.
    • Registered Representatives (RRs) have a duty of care to ensure suitability of investment recommendations for clients, which includes considering various factors, including the client's investment goals and risk tolerance.

    Ethics

    • CIRO values individual behaviors guided by integrity, fairness, professionalism, and a commitment to excellence.
    • Ethical relativists believe that moral principles vary from culture to culture and from person to person.
    • Ethical managers play a critical role in promoting an ethical culture within an organization.

    Ethical Dilemmas

    • An ethical dilemma arises when an individual faces a difficult choice between two or more conflicting options, often involving moral principles or values.
    • In right versus wrong issues, a clear moral principle guides decision-making, making the decision less of a dilemma.
    • In truth versus loyalty conflicts, a dilemma arises between being truthful and being loyal to an individual or organization.
    • Recommending different equity mutual funds based on their performance is an example of a conflict between right versus right, where both options have merit.
    • An investor may face an ethical dilemma when deciding between short-term and long-term investments, considering factors such as risk tolerance and investment goals.

    CIRO and Regulation

    • CIRO expects Regulated Persons to conduct business in a manner that maintains public trust and confidence.
    • Failure to follow procedures for achieving Know Your Client (KYC) may result in disciplinary action by CIRO.
    • A Portfolio Manager must have a license to place orders to buy or sell securities without client approval.
    • The Canadian Securities industry is regulated by CIRO.

    Decision-Making

    • The 'front page test' assesses a decision against the criteria of whether it could withstand public scrutiny.
    • End-based ethical thinking focuses on the consequences of a decision.
    • In right versus right issues, the decision-making process is a dilemma due to the difficulty in choosing between two morally right options.

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    Related Documents

    Chapter 1B Notes - Updated.docx

    Description

    Explore the concepts of discretionary power in investment and ethical decision making. Learn about the relationships between values, ethics, and ethical decision making in the investment industry.

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