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Ethics Case Study of the Week: Professional Misconduct from Civil Disobedience?

By Gary Sarkissian posted 10-18-2021 08:00

  
CFA Institute’s Code of Ethics and Standards of Professional Conduct outline the ethical guidelines for the investment profession that are critical to maintaining the integrity of capital markets and investor trust.  Members, candidates, and even firms make a commitment to uphold these standards as they help elevate ethical decision-making universally around the globe.  

As investment professionals, we face important ethical decisions in our day-to-day activities.  Some scenarios we encounter will be straightforward, while others may be more complex.  No matter the circumstances, continuous learning remains imperative in an evolving investment industry and an adapting regulatory environment. 

For that reason, each week we feature a sample case from CFA Institute’s Ethics in Practice Casebook.  Many cases are built upon real-life examples that may involve a regulatory matter or even a CFA Institute Professional Conduct investigation.  At the end of each case is a multiple-choice question that addresses the ethical nature of the actions taken in that case. 

This week’s case involves Standard I(D) Professional Misconduct.


Professional Misconduct from Civil Disobedience?
Simpson is a portfolio manager employed by a large global investment bank, managing an investment
fund restricted to environmental, social, and governance (ESG) friendly investments. Outside of work, he participates in civil disobedience demonstrations organized by the Extinction Rebellion, a sociopolitical movement that uses nonviolent resistance to protest against climate breakdown, biodiversity loss, and ecological collapse. Simpson is arrested on charges of unlawful assembly, impeding public transit, and disorderly conduct at several demonstrations held in the financial district of the city where he works.  He is ultimately convicted of several criminal offenses. Simpson has signed a standard employment contract with the bank that allows them to terminate the contract of any employee who is convicted of a criminal offence. Under the CFA Institute Code of Ethics and Standards of Professional Conduct (Code and Standards), Simpson’s actions

 A. violate the Code and Standards because he has violated his employment contract with the bank.
 B. do not violate the Code and Standards because he is engaged in conduct promoting the ultimate benefit of society.
 C. violate the Code and Standards because he is arrested for misconduct in the financial district.
 D. do not violate the Code and Standards because his conduct is consistent with the mandate of the fund he manages.
 E. none of the above.


What do you think is the correct choice?  Click the “Analysis” button below to see the analysis for this case, and feel free to discuss in the comments below.  The completion of this case qualifies for 0.25 hour of Standards, Ethics, and Regulation (SER) credit.


This case relates to what constitutes professional misconduct. CFA Institute Standard I(D): Professional Misconduct prohibits CFA Institute members from engaging in any professional conduct involving dishonesty, fraud, or deceit or from committing any act that reflects adversely on their professional reputation, integrity, or competence. Generally, Standard I(D) is not meant to cover legal transgressions resulting from acts of civil disobedience in support of personal beliefs because such conduct does not reflect poorly on the member’s or candidate’s professional reputation, integrity, or competence. The fact that Simpson is arrested in the financial district is not a sufficient nexus to his professional activities to render his actions a violation of the Code and Standards.

The Code of Ethics requires members to promote the integrity and viability of global capital markets for the ultimate benefit of society. But Simpson’s climate protests are not related to the global capital markets. Misconduct with the supposed intent of benefiting society would not be shielded by the Code of Ethics. It is also irrelevant that Simpson’s climate protests are somewhat in line with his professional activities in managing an ESG fund. Finally, Simpson’s arrest does not seem to be an automatic violation of bank policies. Although Simpson’s employment contract gives the bank the option of firing him for criminal activity, the bank can apparently use discretion in retaining employees depending on the nature and circumstances of the conviction. Furthermore, the Code and Standards are not automatically violated with every violation of an employer’s employment policies, unless the violations relate to underlying conduct addressed in the Code and Standards. In this case, choice E is the best response.

This case relates to a question submitted to the CFA Institute Ethics Help Desk.



Image by Tama66 from Pixabay


© 2019 CFA Institute. All rights reserved. You may copy and distribute this content, without modification and for non-commercial purposes, provided you attribute the content to CFA Institute and retain this copyright notice.  This case was written as a basis for discussion and is not prescriptive of how a business situation or professional conduct matter should or should not be handled or addressed. Certain characters mentioned are fictional to facilitate discussion, and any resemblance to actual persons is coincidental.


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