by The importance of ethics in finance is well understood, at least in a general sense. Often, however, ethics are practiced in a rote, nonreflective way. Business leaders in the financial sector must move beyond simple compliance and rule-based consideration. Ethics in finance demands adherence to the highest standards.
The consequences of unethical behavior are clear, from loss of reputation and trust to monetary penalty and criminal prosecution. Effective leaders attend to an inner moral compass which helps minimize the temptation toward unethical behavior.
Scope:
- Provides a moral code of standard
In the financial market, some barriers range from unequal information, misuse of power and resources, etc.
In such cases and those which involve third-party connections, there is a dire need for a proper code to be followed in the industry. From investment to trading to stock to economical activities of the corporate or finance system, all follow an ethical code in all their transactions
- Ethics in finance channelizes confidence in business/corporate dealings
The main objective of the financial industry is to have direct dealings with the industry.
These directly connect to their clients in the form of product or service delivery where they look forward to winning their confidence.
Despite the primary objective to maintain a competitive stature in the industry, they must do so on ethical grounds. In addition to such practices, being ethically right will gives businesses good returns in the long term.
- Ethics makes business/corporate behavior and activities harmonious
In the financial industry, we can expect many people to be part of an organization.
Since these have to work together at different levels and towards a similar core objective, there has to be a set of ethical rules and guidelines that have to be followed.
Principles and Standards
The Institute of Management Accountants outlines basic principles and standards for ethics in finance and business, an industry framework for ethical professional practice.
Principles:
- Honesty
- Fairness
- Objectivity
- Responsibility
Standards:
- Competence
- Confidentiality
- Integrity
- Credibility
Codes of Ethics in Finance
Different moral codes that are supposed to be followed the finance-related behavior of a company towards its employees, customers, public and other stakeholders:
- Acting with honesty and integrity while handling dilemmas of the world of finances.
- Not associating with any real/clear conflicts of interest in personal, or company relationships.
- Providing information that is full, accurate, fair, complete, relevant, objective, understandable, and timely in and for different documents and reports.
- Acting in accordance with all the applicable rules, laws, and regulations of governments along with other relevant public/private regulatory agencies.
- Acting responsibly and in good faith with due care, carefulness, and competence without any sort of misrepresentation of material facts.
- Respecting the confidentiality of information which is acquired in the business course and such information should not be used for the personal benefit.
- Promoting ethical behavior among all the associates and stakeholders of a company.
- Adhering and promoting a code of ethics in the company.
