Financial Advisory Ethics Flashcards

What is the MAS Guidelines on Standards of Conduct for financial advisers?

Answer: Guidelines that set out expected standards of professional conduct and ethical behaviour

These guidelines establish the expected standards of conduct, integrity, and professionalism that financial advisers must maintain when dealing with clients.

What is the consequence of providing misleading financial advice?

Answer: Regulatory sanctions, fines, licence revocation, and potential criminal charges

Providing misleading advice can result in serious consequences including regulatory sanctions, monetary penalties, loss of licence, and criminal prosecution.

What is the adviser's obligation when recommending a product replacement?

Answer: Must demonstrate the replacement is in the client's best interest and explain any costs or losses

When recommending a product replacement, the adviser must show it genuinely benefits the client and explain any surrender charges, waiting periods, or benefits that may be lost.

What is the role of the compliance function in a financial advisory firm?

Answer: To ensure adherence to regulations, laws, and ethical standards

The compliance function monitors and ensures that the firm and its representatives comply with all applicable laws, regulations, and internal policies.

Why is documentation important in financial advisory?

Answer: It provides evidence of advice given, client decisions, and regulatory compliance

Documentation creates an audit trail of the advisory process, protects both the adviser and client, and demonstrates regulatory compliance.

What is the ethical principle of fairness in financial advisory?

Answer: Treating clients fairly and not taking advantage of their lack of knowledge

Fairness means treating clients equitably, not exploiting their lack of financial knowledge, and ensuring they receive fair treatment in all dealings.