1. Credit from bank to broker is controlled under:
a. Regulation T
b. Regulation U
c. Regulation X
d. Regulation Z
2. Interest charges on customer debit balances are based on the:
a. Prime Rate
b. Federal Funds Rate
c. Treasury Bill Rate
d. Broker Loan Rate
3. The maximum amount of customer securities that can be rehypothecated by a broker is:
a. 50 % of the debit balance
b. 70 % of the debit balance
c. 100 % of the debit balance
d. 140 % of the debit balance
4. Under Regulation T, an extension for payment may be requested on:
a. Settlement Date
b. Settlement Date + 1
c. Settlement Date + 2
d. Settlement Date + 5
5. If a customer’s account is frozen:
a. no trading is permitted in the account for 30 days
b. no trading is permitted in the account for 90 days
c. purchases require cash in advance for 30 days
d. purchased require cash in advance for 90 days
6. What are initial and maintenance margins for stock positions in a long margin account ?
a. 50 / 50
b. 50 / 25
c. 50 / 30
d. 25 / 30
7. What are initial and maintenance margins for stock positions in a short margin account?
a. 50 / 50
b. 50 / 25
c. 50 / 30
d. 25 / 30
8. A customer buys 100 shares of ABC stock at $50 as an initial transaction in a margin account.
The customer must deposit:
a. $1000
b. $2000
c. $2500
d. $5000
9. A customer sells short 1000 shares of ABC stock at $8, as the initial transaction in a new margin account. The customer must deposit:
a. $2000
b. $2400
c. $4000
d. $5000
10. A customer has $10,000 to invest. What dollar amount of long call options can be purchased
by the customer?
a. $10,000
b. $20,000
c. $100,000
d. $200,000
11. Customer fails to deliver must be bought in:
a. 5 business days after trade date
b. 5 business days after settlement date
c. 10 business days after trade date
d. 10 business days after settlement date
12. All of the following securities are marginable EXCEPT:
a. Listed stocks
b. Over-the-counter NASDAQ stocks
c. U.S. Government bonds
d. New issues
Use the following information to answer the next 3 question:
A customer margin account shows:
100 shares of ABC @ 50
300 shares of DEF @ 80
200 shares of PDQ @ 30
Debit = $6,000
SMA = $11,500
Reg. T = 50 %
13. What is the equity in the account?
a. $35,000
b. $29,000
c. $23,500
d. $17,500
14. How much of other marginable common stocks can be purchased without making a deposit?
a. $6,000
b. $11,500
c. $12,000
d. $23,000
15. What is the minimum maintenance margin requirement?
a. $2,000
b. $8,750
c. $10,500
d. $17,500
16. Which of the following does not affect SMA in a long margin account?
a. purchase of securities
b. sale of securities
c. increase in market value
d. decrease in market value
17. A customer sells short 100 shares of ABC at 15 as an initial transaction in a new margin account. The customer must deposit:
a. $750
b. $1,500
c. $2,000
d. $2,500
18. The formula for equity in a combined margin account is:
a. long market value + short market value - credit balance - debit balance
b. long market value + short market value + credit balance - debit balance
c. long market value - short market value + credit balance - debit balance
d. long market value - short market value - credit balance + debit balance
19. Which of the following will not effect SMA in a short margin account?
a. purchase of securities
b. sale of securities
c. increase in market value
d. decrease in market value
20. A customer buys 5 ABC Jan 50 Calls @ $5 when the market price of ABC is $51. The
customer must deposit:
a. $500
b. $2500
c. $3000
d. $5000
Firm Element CE Training
Saturday, November 17, 2007
Suitibility CE Exam 1 Firm Element
1. Which of the following should occur in order to adhere to fair and reasonable securities sales practices?
I. A rep should have reasonable grounds for believing that an investment recommendation is suitable.
II. A rep should make reasonable efforts to obtain from the customer any information that would be required
to determine suitability.
III. A rep should make suitability inquiries that are consistent with the NASD’s Conduct Rules.
IV. A rep should disclose all material facts concerning the investment recommendation.
A. I, II and III only
B. I and IV only
C. III and IV only
D. I, II, III and IV
2. In order to make a suitable investment recommendation, a rep must inquire as to the customer’s
I. tax status
II. investment experience
III. investment objectives
IV. financial condition
A. I only
B. I, II and IV only
C. III and IV only
D. I, II, III and IV
3. Which of the following characteristics best describes growth?
A. Increase in the value of an investment over time
B. Increase in interest and dividends over time
C. Investments that appreciate tax deferred
D. All of the above
4. Which of the following investments is least appropriate for a customer who is primarily concerned with
liquidity?
A. Preferred stock
B. Municipal bond mutual fund
C. Bank savings account
D. Direct participation program
5. Bondholders face the risk that the value of their bonds may fall as interest rates rise. This is known as
A. credit risk
B. liquidity risk
C. market risk
D. marketability risk
6. Credit risk involves:
A. safety of principal
B. fluctuations in overall interest rates
C. the danger of not being able to sell the investment at a fair market price
D. inflationary risks
7. All of the following types of financial information should be obtained from a customer before opening an
account or transacting business EXCEPT
A. the customer’s investment experience
B. the customer’s net worth
C. the customer’s actual or estimated annual income
D. the customer’s ability to borrow money from interested parties
8. If your customer’s primary investment concern is to guard against inflation, the best mutual fund for him would
be a:
A. bond fund
B. growth fund
C. money-market fund
D. Mutual funds do not offer inflation protection
9. In general, the greater the variation in an investment’s potential gains or losses, the
A. smaller the investment’s return
B. greater the investment’s return
C. smaller the investment’s risk
D. greater the investment’s risk
10. An increase in the value of an asset due to economic and other business conditions is called
A. interest
B. dividends
C. appreciation
D. depreciation
11. An elderly widow with no other income wishes to invest the proceeds from her husband’s life insurance.
Which of the following would be a suitable recommendation?
A. Call options
B. Cattle futures
C. Oil and gas exploration program that you know is going to strike
D. Blue chip income stocks
12. Registered rep Eve Grizzly always inquires into her clients’ investment objectives, financial situations and
needs. According to securities industry rules, Eve is:
A. obtaining the information required to fulfill her professional obligation regarding suitability
B. determining whether she has any inherent conflicts of interest with her clients
C. violation her ethical obligation regarding confidentially of client information
D. giving herself an unethical advantage regarding how much the client can afford to spend on commissions
13. Bonds with long maturities offer
I. stability of income
II. stability of market value
III. fluctuation of income
IV. fluctuation of market value
A. I and II
B. I and IV
C. II and III
D. III and IV
14. The NASD requires that investment recommendations must include the disclosure of
A. the risks related to the investment
B. the sales charges related to the transaction
C. all material facts related to the investment
D. all of the above
15. In order to fit the NASD’s requirement for a suitable recommendation, a product must be matched with the
I. customer’s financial means
II. rep’s commission structure
III. customer’s investment objectives
IV. rep’s risk tolerance
A. I only
B. I and III only
C. II and IV only
D. I, II, III and IV
I. A rep should have reasonable grounds for believing that an investment recommendation is suitable.
II. A rep should make reasonable efforts to obtain from the customer any information that would be required
to determine suitability.
III. A rep should make suitability inquiries that are consistent with the NASD’s Conduct Rules.
IV. A rep should disclose all material facts concerning the investment recommendation.
A. I, II and III only
B. I and IV only
C. III and IV only
D. I, II, III and IV
2. In order to make a suitable investment recommendation, a rep must inquire as to the customer’s
I. tax status
II. investment experience
III. investment objectives
IV. financial condition
A. I only
B. I, II and IV only
C. III and IV only
D. I, II, III and IV
3. Which of the following characteristics best describes growth?
A. Increase in the value of an investment over time
B. Increase in interest and dividends over time
C. Investments that appreciate tax deferred
D. All of the above
4. Which of the following investments is least appropriate for a customer who is primarily concerned with
liquidity?
A. Preferred stock
B. Municipal bond mutual fund
C. Bank savings account
D. Direct participation program
5. Bondholders face the risk that the value of their bonds may fall as interest rates rise. This is known as
A. credit risk
B. liquidity risk
C. market risk
D. marketability risk
6. Credit risk involves:
A. safety of principal
B. fluctuations in overall interest rates
C. the danger of not being able to sell the investment at a fair market price
D. inflationary risks
7. All of the following types of financial information should be obtained from a customer before opening an
account or transacting business EXCEPT
A. the customer’s investment experience
B. the customer’s net worth
C. the customer’s actual or estimated annual income
D. the customer’s ability to borrow money from interested parties
8. If your customer’s primary investment concern is to guard against inflation, the best mutual fund for him would
be a:
A. bond fund
B. growth fund
C. money-market fund
D. Mutual funds do not offer inflation protection
9. In general, the greater the variation in an investment’s potential gains or losses, the
A. smaller the investment’s return
B. greater the investment’s return
C. smaller the investment’s risk
D. greater the investment’s risk
10. An increase in the value of an asset due to economic and other business conditions is called
A. interest
B. dividends
C. appreciation
D. depreciation
11. An elderly widow with no other income wishes to invest the proceeds from her husband’s life insurance.
Which of the following would be a suitable recommendation?
A. Call options
B. Cattle futures
C. Oil and gas exploration program that you know is going to strike
D. Blue chip income stocks
12. Registered rep Eve Grizzly always inquires into her clients’ investment objectives, financial situations and
needs. According to securities industry rules, Eve is:
A. obtaining the information required to fulfill her professional obligation regarding suitability
B. determining whether she has any inherent conflicts of interest with her clients
C. violation her ethical obligation regarding confidentially of client information
D. giving herself an unethical advantage regarding how much the client can afford to spend on commissions
13. Bonds with long maturities offer
I. stability of income
II. stability of market value
III. fluctuation of income
IV. fluctuation of market value
A. I and II
B. I and IV
C. II and III
D. III and IV
14. The NASD requires that investment recommendations must include the disclosure of
A. the risks related to the investment
B. the sales charges related to the transaction
C. all material facts related to the investment
D. all of the above
15. In order to fit the NASD’s requirement for a suitable recommendation, a product must be matched with the
I. customer’s financial means
II. rep’s commission structure
III. customer’s investment objectives
IV. rep’s risk tolerance
A. I only
B. I and III only
C. II and IV only
D. I, II, III and IV
Ethics Securites Continuing Education CE
The securities industry is a highly competitive one. For a rep, there exists ample opportunity to conduct business inappropriately at the expense of a competitor. Misrepresentation or defamation of a competitor gives the entire industry a bad image.
Defamation is any false of malicious communication-written or oral-that injures another’s reputation or character.
Both individuals and companies can be defamed. Unethical registered reps practice defamation by spreading rumors or falsehoods about the character of a competing rep or another firm.
As a duty to the rep’s firm and to the industry itself, a rep must resist this temptation. Ethics requires a rep to acknowledge the worth of other reps and their products and compete only on the basis of the value of the products and services that she can provide.
Ethics does not have to be incompatible with capitalism. Profit is not a dirty word. In the long run, good ethics is good business. Hard but fair competition cannot help but benefit the public.
Ethics usually precedes the law. While many ethical standards of conduct have been codified, many have not. Something can be legal but not ethical. For example, it is legal to encourage a customer to invest more than she can afford to, though it is not ethical. Ethics goes beyond the letter of the law and entails not only what a person “must do” but what a person “should do.”
However, it should be noted that the law does provide a very specific ethical direction for everyone through civil and criminal statutes. Under the law, ethical conduct is generally defined as that which a reasonable person is expected to do under the circumstances. Also defined in the law are illegal and improper conduct and the penalties for such conduct.
A registered representative’s primary ethical responsibilities are the securities industry regulators, the general public, the rep’s firm and the rep’s customers.
The responsibility to regulate the securities industry is shared by the federal and state governments and the self-regulatory organizations. However, though government regulations and industry regulations may differ, the underlying standard of ethical conduct is the same. The register rep must comply with the intent of as well as the letter of the law.
The registered rep has more control over the public’s attitude toward securities than do sales representatives for most other consumer products. This is because the rep initiates contact with a prospective customer, determines the suitability of investing, recommends certain products or strategies, makes the sales presentation and finally develops a long-term relationship with the customer.
Because this special relationship involves a great deal of contact between the customer and the rep (and because the public generally understands little about the securities markets), public perceptions of the industry itself are based on how will-or how poorly- a rep does his job. Thus, the registered rep has two main ethical responsibilities to the public:
to inform the public about investing with the highest level of professional integrity; and
to strive for an equally high level of professionalism in all public contacts in order to maintain the strong positive image of the securities industry.
Serving on industry committees, assisting with public education and educating yourself are all part of service to the industry; other examples include representing the firm and the industry in community activities and attending industry conferences and seminars.
In carrying out her duties, the registered rep is the direct representative of the broker-dealer. Her day-to day activities directly reflect on the firm’s image within the community. Should the rep behave unethically, everyone in that community is given reason to believe that the firm is also unethical.
Even a well-intentioned employee of a broker-dealer or investment adviser can sometimes run afoul of the regulations. For example, a customer might suggest that an employee deliver a security in person, saving the firm the time and expense of registration and registered-mail delivery. But in most firms, delivering securities in this fashion is strictly against policy, and any person doing so could be subject to dismissal.
Shortcuts are rarely a good idea-policies and regulations protect the employee, the firm and the customer, Included in industry newsletters are numerous accounts of securities industry professionals who have been barred from the business and fined large sums of money. Some of them committed legal violations and others used poor judgment. As a result of their actions, these reps were forced to give up their plans for success in the securities industry and to look in other fields to begin their careers over again.
The registered rep can meet his ethical responsibilities to a customer by filling the customer’s needs and providing quality service. Service is a primary function of the securities industry. The way that service is provided often
determines the rep’s future because customers are a good source for future sales and references. Throughout this course, we will discuss ways in which reps can serve their customers while maintaining ethical standards.
An ethical customer makes full and honest disclosure to the registered representative. This information is all the representative or investment adviser has on which to base recommendations.
Customer information also may be important in gaining permission to engage in specific kinds or sizes of trades. A customer who fails to disclose relevant information could jeopardize the career of the representative or investment adviser.
Failure on the part of a customer to provide information is often the first signal to a compliance department of potential trouble.
Practices that tend to give certain investors and unfair advantage over the general public ( a prime example being insider trading) are prohibited by regulations. It is the responsibility of the individual investor to abide by these regulations.
A registered rep should be aware that an unscrupulous customer may someday try to “trick” him into violating the laws, regulations or rules for the customer’s illicit purposes. New brokers are often the most susceptible to such customer schemes.
Broker-dealers protect their customers through self-regulation. A brokerage firm has the ability to establish policies that maintain a balance of interest among the customer, the registered rep and the firm. For this three-sided relationship to endure, each party must treat the others with respect and professionalism.
Registered reps feel that many ethical challenges confronting them stem from two sources: competition and the stress of performance quotas. Reps notice that the intense competition within the securities industry forces management to look at the bottom line, which creates a conflict with business ethics. The same conflict comes from the competition reps face individually. Reps may feel that the practice of measuring performance on the basis of end results poses a challenge to ethics because the result is considered more important than the means.
One solution to the ethical conflicts presented by the business environment is to remove the pressure to compromise a rep’s own values and standards. The firm can alleviate this pressure by:
emphasizing ethics in business operations;
providing clear communication of appropriate ethical behavior.;
allowing a rep to go to his boss or beyond his boss for ethical advice; and
distributing a code of ethics to all employees.
To address potential conflicts between ethical standards and the firm’s bottom line, broker-dealers might establish rules similar to the following:
Because suitability should drive sales, compensation programs for selling securities must not be structured to encourage unsuitable recommendations.
Increased incentives paid in sales contests or in the introduction of new products might result in a conflict of interest should be controlled.
Supervision of the sales program should be increased in instances where payout to reps is weighted toward proprietary products.
Paying excessive incentives, bonuses and commission rates to reps for accepting employment with the firm should be prevented.
Defamation is any false of malicious communication-written or oral-that injures another’s reputation or character.
Both individuals and companies can be defamed. Unethical registered reps practice defamation by spreading rumors or falsehoods about the character of a competing rep or another firm.
As a duty to the rep’s firm and to the industry itself, a rep must resist this temptation. Ethics requires a rep to acknowledge the worth of other reps and their products and compete only on the basis of the value of the products and services that she can provide.
Ethics does not have to be incompatible with capitalism. Profit is not a dirty word. In the long run, good ethics is good business. Hard but fair competition cannot help but benefit the public.
Ethics usually precedes the law. While many ethical standards of conduct have been codified, many have not. Something can be legal but not ethical. For example, it is legal to encourage a customer to invest more than she can afford to, though it is not ethical. Ethics goes beyond the letter of the law and entails not only what a person “must do” but what a person “should do.”
However, it should be noted that the law does provide a very specific ethical direction for everyone through civil and criminal statutes. Under the law, ethical conduct is generally defined as that which a reasonable person is expected to do under the circumstances. Also defined in the law are illegal and improper conduct and the penalties for such conduct.
A registered representative’s primary ethical responsibilities are the securities industry regulators, the general public, the rep’s firm and the rep’s customers.
The responsibility to regulate the securities industry is shared by the federal and state governments and the self-regulatory organizations. However, though government regulations and industry regulations may differ, the underlying standard of ethical conduct is the same. The register rep must comply with the intent of as well as the letter of the law.
The registered rep has more control over the public’s attitude toward securities than do sales representatives for most other consumer products. This is because the rep initiates contact with a prospective customer, determines the suitability of investing, recommends certain products or strategies, makes the sales presentation and finally develops a long-term relationship with the customer.
Because this special relationship involves a great deal of contact between the customer and the rep (and because the public generally understands little about the securities markets), public perceptions of the industry itself are based on how will-or how poorly- a rep does his job. Thus, the registered rep has two main ethical responsibilities to the public:
to inform the public about investing with the highest level of professional integrity; and
to strive for an equally high level of professionalism in all public contacts in order to maintain the strong positive image of the securities industry.
Serving on industry committees, assisting with public education and educating yourself are all part of service to the industry; other examples include representing the firm and the industry in community activities and attending industry conferences and seminars.
In carrying out her duties, the registered rep is the direct representative of the broker-dealer. Her day-to day activities directly reflect on the firm’s image within the community. Should the rep behave unethically, everyone in that community is given reason to believe that the firm is also unethical.
Even a well-intentioned employee of a broker-dealer or investment adviser can sometimes run afoul of the regulations. For example, a customer might suggest that an employee deliver a security in person, saving the firm the time and expense of registration and registered-mail delivery. But in most firms, delivering securities in this fashion is strictly against policy, and any person doing so could be subject to dismissal.
Shortcuts are rarely a good idea-policies and regulations protect the employee, the firm and the customer, Included in industry newsletters are numerous accounts of securities industry professionals who have been barred from the business and fined large sums of money. Some of them committed legal violations and others used poor judgment. As a result of their actions, these reps were forced to give up their plans for success in the securities industry and to look in other fields to begin their careers over again.
The registered rep can meet his ethical responsibilities to a customer by filling the customer’s needs and providing quality service. Service is a primary function of the securities industry. The way that service is provided often
determines the rep’s future because customers are a good source for future sales and references. Throughout this course, we will discuss ways in which reps can serve their customers while maintaining ethical standards.
An ethical customer makes full and honest disclosure to the registered representative. This information is all the representative or investment adviser has on which to base recommendations.
Customer information also may be important in gaining permission to engage in specific kinds or sizes of trades. A customer who fails to disclose relevant information could jeopardize the career of the representative or investment adviser.
Failure on the part of a customer to provide information is often the first signal to a compliance department of potential trouble.
Practices that tend to give certain investors and unfair advantage over the general public ( a prime example being insider trading) are prohibited by regulations. It is the responsibility of the individual investor to abide by these regulations.
A registered rep should be aware that an unscrupulous customer may someday try to “trick” him into violating the laws, regulations or rules for the customer’s illicit purposes. New brokers are often the most susceptible to such customer schemes.
Broker-dealers protect their customers through self-regulation. A brokerage firm has the ability to establish policies that maintain a balance of interest among the customer, the registered rep and the firm. For this three-sided relationship to endure, each party must treat the others with respect and professionalism.
Registered reps feel that many ethical challenges confronting them stem from two sources: competition and the stress of performance quotas. Reps notice that the intense competition within the securities industry forces management to look at the bottom line, which creates a conflict with business ethics. The same conflict comes from the competition reps face individually. Reps may feel that the practice of measuring performance on the basis of end results poses a challenge to ethics because the result is considered more important than the means.
One solution to the ethical conflicts presented by the business environment is to remove the pressure to compromise a rep’s own values and standards. The firm can alleviate this pressure by:
emphasizing ethics in business operations;
providing clear communication of appropriate ethical behavior.;
allowing a rep to go to his boss or beyond his boss for ethical advice; and
distributing a code of ethics to all employees.
To address potential conflicts between ethical standards and the firm’s bottom line, broker-dealers might establish rules similar to the following:
Because suitability should drive sales, compensation programs for selling securities must not be structured to encourage unsuitable recommendations.
Increased incentives paid in sales contests or in the introduction of new products might result in a conflict of interest should be controlled.
Supervision of the sales program should be increased in instances where payout to reps is weighted toward proprietary products.
Paying excessive incentives, bonuses and commission rates to reps for accepting employment with the firm should be prevented.
Ethics CE Part 1 Securities CE
The securities industry sets and enforces high ethical standards. The government regulates the industry. The self-regulatory organizations police the firms. The firm’s compliance and legal department police the employees. All of these regulatory bodies have one main function: to ensure the public is dealt with fairly.
Securities industry regulators are very diligent in detecting and preventing unethical behavior. Investigators
regularly examine activities at all levels-from large firms, to investment advisers, to registered reps, to individual
investors. Even the most junior of employees is expected to maintain high standards of business ethics and commercial honor in dealing with customers, the public, the firm and the industry.
To encourage each firm to do its part in preventing unethical behavior, regulators are placing an ever-greater emphasis on the firm’s responsibility to hire only reps who play by the rules.
At some time in your life, you’ve been exposed to the golden rule that states, “Do unto others as you would have them do unto you”. Whether taught by a parent, a teacher or a religious leader, this golden rule not only promises spiritual satisfaction and fulfillment, but it also can serve as a practical guide for registered rep’s daily life.
To a certain extent, ethics is a set of instructions on how to deal daily with a group Ana community. These instructions revolve around a single theme: social behavior that favors the group over the individual.
Antisocial behavior usually stems from individual selfishness and greed-characteristics that are against the common good and disruptive to overall balance and harmony, Because ethical behavior on the part of the individual resulted in group harmony, communities turned to such ethics as the basis for common law, which in turn became the basis for our own civil and criminal codes of conduct.
Ethical business practices can help foster satisfied customers, as well as a stable economy. In this context, ethics is about social justice-making sure that people receive benefits from every decision made.
Unfortunately, our society isn’t always critical of wrongdoing. For example, many people are impressed with the wealth accumulated by some individuals and ignore the means by which it was gained.
The tendency to emphasize personal financial gain is a common way many businesses-including those in the securities industry-motive their employees. Financial gain is often held out as the primary measure of success. This is not to say that pursuit of financial gain is wrong; however, consider how incentives such as “ Top Producer of
the Month” rosters have the tendency to spotlight financial achievement while ignoring professionalism and public service. What about a firm atmosphere that stresses results by any means? Shouldn’t those who have achieved ethical success-those who have best served the needs of their firms and the public-be honored too?
If you concentrate too much on the financial rewards of your job, you might look at a customer and think, “What can I get from him?” instead of, “What can I do for him?” Your relationship with the customer will suffer if you approach him with the wrong attitude.
Certainly, registered reps should expect to be adequately rewarded for success, and production figures are vital to the well-being of any broker-dealer. However, no less important is meeting the needs of customers and the public in a proper and ethical manner. Self-interest is fine, but not when maintained at any cost-the cost of your self-respect and the cost of others.
Securities industry regulators are very diligent in detecting and preventing unethical behavior. Investigators
regularly examine activities at all levels-from large firms, to investment advisers, to registered reps, to individual
investors. Even the most junior of employees is expected to maintain high standards of business ethics and commercial honor in dealing with customers, the public, the firm and the industry.
To encourage each firm to do its part in preventing unethical behavior, regulators are placing an ever-greater emphasis on the firm’s responsibility to hire only reps who play by the rules.
At some time in your life, you’ve been exposed to the golden rule that states, “Do unto others as you would have them do unto you”. Whether taught by a parent, a teacher or a religious leader, this golden rule not only promises spiritual satisfaction and fulfillment, but it also can serve as a practical guide for registered rep’s daily life.
To a certain extent, ethics is a set of instructions on how to deal daily with a group Ana community. These instructions revolve around a single theme: social behavior that favors the group over the individual.
Antisocial behavior usually stems from individual selfishness and greed-characteristics that are against the common good and disruptive to overall balance and harmony, Because ethical behavior on the part of the individual resulted in group harmony, communities turned to such ethics as the basis for common law, which in turn became the basis for our own civil and criminal codes of conduct.
Ethical business practices can help foster satisfied customers, as well as a stable economy. In this context, ethics is about social justice-making sure that people receive benefits from every decision made.
Unfortunately, our society isn’t always critical of wrongdoing. For example, many people are impressed with the wealth accumulated by some individuals and ignore the means by which it was gained.
The tendency to emphasize personal financial gain is a common way many businesses-including those in the securities industry-motive their employees. Financial gain is often held out as the primary measure of success. This is not to say that pursuit of financial gain is wrong; however, consider how incentives such as “ Top Producer of
the Month” rosters have the tendency to spotlight financial achievement while ignoring professionalism and public service. What about a firm atmosphere that stresses results by any means? Shouldn’t those who have achieved ethical success-those who have best served the needs of their firms and the public-be honored too?
If you concentrate too much on the financial rewards of your job, you might look at a customer and think, “What can I get from him?” instead of, “What can I do for him?” Your relationship with the customer will suffer if you approach him with the wrong attitude.
Certainly, registered reps should expect to be adequately rewarded for success, and production figures are vital to the well-being of any broker-dealer. However, no less important is meeting the needs of customers and the public in a proper and ethical manner. Self-interest is fine, but not when maintained at any cost-the cost of your self-respect and the cost of others.
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