Ethical Issues In A Financial Analyst And Advice Firm

In the given case, it was observed that a person is working in the biggest financial analyst and advice firm as the financial analyst. This firm generally produces certain research papers both at industry as well as academic level which significantly influences the entire financial market. Moreover, leading researcher in this firm, kim watts is well-experienced researcher who has the expertise in predicting the overall financial performance of leading firms and provide such data to certain institutional investment firm. However, the analyst observe certain kind of inaccuracy with respect to the data provided by kim for further analysis since the data does not follow the basic statistical assumptions and the source of such data is also unknown. Moreover, the confidential agreement which prevented kim to disclose these information were also observed to be suspicious. In addition to that, the boutique investors used to send gifts to dr kim.

Facts of the case

The person has to work on the proprietary data which is generally not been disclosed publicly. Kim watt, her team lead, shares raw data with the finance and accounting departments of the university at high rates of subscription in order to make extra source of earning for this firm. The analyst used to conduct regular data checks and while doing so he discovered that the data provided by dr kim does not fulfil the general assumptions for statistics. The analyst raised the query with kim but she refused to disclose the source for such data and she said that she cannot disclose the source due to the strict confidential agreements. This confidential agreements prevented her and her assistant david smith from disclosing the real data or any identity of the firm from which they are being actually gathered. Analyst consulted with the legal team of the firm regarding this non-closure and confidential agreements and found certain contradictory dates, unusual terms and the evidences that terms on the confidentiality arrangements were revised extensively. Moreover, certain rumours regarding the close relationship between kim and her assistant was also known. In addition to that, the recommendations and findings gained from research analysis of such data enabled some high rated investors to become the leader in their markets. Kim also used to receive certain gifts from such boutique investors and kim considered it to a great strategy to build up long run relationship with such top investors.

The primary stakeholders in the case study are kim watts, shareholders, and institutional investment firms, leading firms, financial analyst, regulatory bodies and employees of the firm especially the ones working in kim watts’s team.

It has been observed that in case of this financial advice and analyst firm, there were certain ethical issues. Professional competency and due care, and professional behaviour were the major ethical issues in this case. The principle of a professional competency and due care imposes certain obligations on every professional in accounting and financial field which are stated below:

• To sustain the professional skill and knowledge at a level needed to assure that employers or clients receive the competent and professional service; and
• To behave diligently as per the applicable professional standards while providing such professional services.

Thus, it was known from these principles that the professionals need to adhere to all the necessary technical and professional standards set for that service and needs to act on the best interest of its clients. It was seen that kim watt act on the best interest of the client and all the advice provided by her team has turned to be profitable and effective for these clients. However, it was known that the financial analyst who joined the team of kim watts found something inappropriate with the data provided by kim watts for further analysis purpose that is the data gathered by the kim watts and her assistant were not in accordance with the basic statistical assumptions. In addition to that, when analyst asked for the source of this data, kim refused to reveal the actual data and the source of data stating that he is not allowed to reveal the same because of strict non-disclosure and confidential agreements. This indicates that she has shown an unethical behaviour by not following the professional and technical standards like the basic statistic assumption. Thus, she can be considered as professionally incompetent with this respect. She has also shown an unprofessional behaviour which is again an ethical issue. As discussed earlier, she has not comply with required regulations and norms while collecting the data which is against the principle of professional behaviour

Primary Stakeholders

The norms, values and principle or rather the codes which have been breached in the given case study are stated below:

• Integrity: As per apes110 and subsection 111, integrity refers to the truthfulness and fair dealing (clayton and van staden 2015). In the given case study, it was observed that the data which was developed by kim watts is questionable since she is neither revealing the actual data nor the source from where she has obtained these data. Although these data enabled was beneficial for both the advisory firm and the client, the appropriateness of such data is observed to be suspicious.
• Professional behaviour: As per the apes110 code of ethics and subsection 115, the member must adhere to the principle of the professional behaviour which needs the member to adhere to the prevailing laws and regulations and prevent any kind of conduct which he/she knows might discredit his./her profession (yan and maheshwari 2020). In the given case study, it was found that kim watts did not follow the basic assumption for statistics while gathering the data which indicates that she did not complied with the principle of professional behaviour.

It is observed that there are certain major alternative course of actions which can be taken up by kim watts. The key alternatives course of actions which are available in the given case study are stated below:

Alternative 1: Kim watts can reveal the actual data as well as the source of such data in order to make them reliable and avoid any kind of legal actions because which she might because of not disclosing these information. Moreover, she can follow the basic assumptions for gathering the required data in order to maintain professional behaviour.

Alternative 2:  Kim watts can keep the data and its source confidential to avoid any kind of lawsuit against her and the entire company for breaching the non-disclosure agreement.

Alternative 3: Kim watts can seek a legal advice either from the legal team or from the monitoring body regarding this entire matter and get a proper solution to comply with the fundamental principles of ethics.

Acquiring a legal advice regarding the entire matter from the firm’s legal team or the monitoring body is observed to be the most effective course of action which dr kim watts can opt for. This will enable her to act in accordance with almost every fundamental principle of ethics accept confidentiality as dr kim watts might have to disclose the agreement to the legal team or the concerned in order to obtain most viable solution. Thus, the financial analyst can explain her perspective and request dr kim watts to seek such legal advice regarding the entire matter so that she can act ethically.

If kim watts reveal the real data and their source then she would breach the principle of confidentiality since she has strict non-disclosure agreements regarding the same and so she can be sued by the concerned person as per law. However, if she does not disclose these information, then there is a high possibility that she have to face certain lawsuits in future due to incompetency of such data and their source. Moreover, if she opt for legal advice from the legal team or monitoring body then she will be complying with most of the principle of ethics; however she can face certain confidentiality issues.

After analysing the entire given scenario, the decision which has been made is that the entire situation will be properly discussed with dr kim and she would be requested to seek the legal advice from the legal team of the firm or the code monitoring body in order to deal with the entire situation and get the best alternative solution so that she can act ethically.

It is quite necessary for any individual associated with financial services to follow and act according to the fundamental principles of ethics as per the fasea and apes110 code of ethics. These fundamental principle generally develops the required standard of behaviour of the member (wijesinghe 2017). Apesb (accounting professional & ethical standards board limited) is the regulatory or rather monitoring body which issued this apesa110 code of ethics for the professional accountant (henderson et al. 2015). The major role of this monitoring body in the given case study is to identify such breaching activities of dr kim prevailing in this firm. It is quite essential for the monitoring body to get hold of such activities which is taking place in this firm in order to take appropriate actions to stop such activities in this said firm. Moreover, the monitoring body has another role to play in this given case that is to help the concerned firm or rather the concerned member to act as per the prevailing primary principles of ethics as per the apes110 code of ethics (martinov-bennie and mladenovic 2015). This is found to be the primary responsibility of the code monitoring body to rectify such ethical issues of the member in the firm and find effective ways so that the member can follow the required primary code of ethics.

Conclusion:

From the above discussion, it can be concluded that kim watts is observed to be in big trouble due to her certain actions which took while leading a research team in a top financial advice and analyst firm. She has been found to be breaching certain primary principle of the ethics namely principle of integrity and professional behaviour as per the fasb and apes110 code of ethics. Thus, aaa mode for decision making helped to find out the best course of action which could be employed by the concerned person that is kim watts in order to operate as per the primary principle of the ethics. The preferred corse of action in the given case study was to take the opinion or rather legal advice regarding the entire matter from the legal advisor or any other concerned body in order to remove the unethical behaviour and comply with the required code of ethics. This course of action is most effective among all the available course of action because it would help her to comply with most of the fundamental principle of ethics without purposely breaching any of them. Moreover, this course of action will also enable kim watts to avoid any kind of legal suits against her or the company.

References: 

Apesb, 2018. Apes code 110 of ethics for professional accountants(including independance standards). [online] available at: <https://apesb.org.au/uploads/home/02112018000152_apes_110_restructured_code_nov_2018.pdf> [accessed 13 january 2022].

Clayton, b.m. And van staden, c.j., 2015. The impact of social influence pressure on the ethical decision making of professional accountants: Australian and new zealand evidence. Australian accounting review, 25(4), pp.372-388.

Henderson, s., peirson, g., herbohn, k. And howieson, b., 2015. Issues in financial accounting. Pearson higher education au.

Martinov-bennie, n. And mladenovic, r., 2015. Investigation of the impact of an ethical framework and an integrated ethics education on accounting students’ ethical sensitivity and judgment. Journal of business ethics, 127(1), pp.189-203.

Oyadonghan, k.j., 2019, june. Conference theme 5: Social, environmental and ethical reporting the prima facie responsibility of noclar and the duty of confidentiality: Ethical values guiding financial reporting (050). In th 5 annual international academic conference proceedings, 2019 (p. 81).

To, c., numbers, s.h., decline, u.l., action, r., staff, n.t.p., clean, s.t.t. And areas, t.o.w., 2019. Professional update. Community practitioner.

Wijesinghe, m.c., 2017. Technical update 2017/2.

Yan, k. And maheshwari, s., 2020. Limitations of financial adviser standards and ethics authority’s code of ethics. Delhi business review, 21(1), pp.1-11.