An effective framework for ethical decision-making should allow investment professionals to examine their choices in the context of conflicting interests. It should allow the practitioner to see the situation from multiple perspectives and to think past short-term self-interest. Consistently using such a framework should help the practitioner develop judgment.
“Ethics and Trust in the Investment Profession” outlines the following ethical decision making framework.
■ Identify: Relevant facts, stakeholders and duties owed, ethical principles,
conflicts of interest
■ Consider: Situational influences, additional guidance, alternative actions
■ Decide and act
■ Reflect: Was the outcome as anticipated? Why or why not?
In the initial phase, consider the facts available and any information that you need to obtain to completely understand the situation. Distinguish between facts and opinion, judgements, and biases. Identify the stakeholders—clients, colleagues, your employer, market participants—and the duties you have to each of them. What ethical and legal principles apply? What conflicts of interest exist between the various stakeholders?
Next consider the situational influences and behavioral biases that could affect your decision making. Seek guidance from trusted sources such as your compliance department or outside legal counsel, or from someone who is not affected by the same situational influences and behavioral biases. You can also refer to your firm’s policies and procedures
and the CFA Institute Code and Standards.
Finally, make a decision and assess its outcome.