11 - Ethics & Professional Standards in Financial Services

A comprehensive set of vocabulary flashcards covering key terms, regulations, cultural drivers, operational tools and stakeholder concepts related to ethics and professional standards in financial services.

Ethics (business context)

The principles guiding decisions and behaviours at work; broader than regulation and concerned with doing the right thing before, during and after rules exist.

Corporate Social Responsibility (CSR)

A firm’s framework for identifying, prioritising and engaging stakeholders on social, environmental and community issues that affect—and are affected by—its business.

Embedding ethics

Turning values and codes into consistent, everyday actions and decisions across all levels and functions of a firm.

Ethical dilemma

A situation where two or more values come into conflict, requiring a choice that inevitably sacrifices at least one value.

Ethics code

A high-level document stating the standards of ethical behaviour expected of employees or members of a profession.

Value statement

A short list of core attributes a firm expects its people to uphold; it sits above and informs the ethics code.

Principles for Businesses

Fundamental obligations applying to every FCA-regulated firm, forming the cornerstone of the UK regulatory framework.

Senior Managers & Certification Regime (SM&CR)

UK regime that sets conduct rules and accountability standards for individuals in regulated firms, excluding ancillary staff.

Conduct Rules

Enforceable behavioural standards within SM&CR that emphasise integrity, due skill, care and diligence for all relevant staff.

Delegation vs Accountability

Responsibilities may be delegated to others, but ultimate accountability for outcomes remains with the original individual.

Whistle-blowing

Raising internal or external concerns about danger, risk, malpractice or wrongdoing that affects others.

Whistle-blowing champion

Senior individual appointed to ensure a firm’s whistle-blowing arrangements are independent, effective and protective of staff.

Retail Distribution Review (RDR)

Reforms that raised professional standards for retail investment advisers through qualifications, CPD and ethical requirements.

Accredited body

Organisation authorised to monitor advisers’ professionalism and issue annual statements confirming qualification, CPD and ethical compliance.

Competence assessment

Firm’s duty to verify individuals possess the knowledge, skills and experience to meet conduct rules.

Integrity (regulatory emphasis)

Acting honestly and consistently with strong moral principles; a core expectation under FCA rules.

Due skill, care and diligence

Standard requiring individuals to perform their roles competently, attentively and thoroughly.

Business benefits of ethics

A strong ethical culture builds trust, attracts and retains customers, lowers costs and increases long-term shareholder returns.

Consumer Duty

FCA initiative setting a high standard of care and requiring firms to focus on good consumer outcomes across retail markets.

Fair value

A Consumer Duty expectation that products provide benefits proportionate to cost; subject to regulatory scrutiny.

Vulnerable consumer

Person less able to represent their interests due to personal circumstances or biases, increasing risk of poor outcomes.

Financial inclusion

Ensuring people can access and use appropriate financial products and services across different life stages and contexts.

Data ethics

Moral considerations governing the collection, use and impact of data and AI in financial services.

Consent (data ethics)

The clarity, specificity and informed nature of customer permission for data use.

Privacy (data ethics)

Limitations on re-using data in contexts different from those for which it was supplied.

Equity (data ethics)

Fair treatment of individuals and groups, including those with protected characteristics, in data-driven decisions.

Transparency (data ethics)

Providing understandable explanations of factors influencing automated or human decisions affecting customers.

Culture (FCA definition)

Shared assumptions within a group about how to solve problems and win business, shaping integrity and trust.

Purpose (cultural driver)

Clear statement of what the firm seeks to achieve and how that purpose guides decisions at every level.

Leadership (cultural driver)

Senior figures modelling desired behaviours and clarifying expectations to foster an ethical culture.

Rewarding & managing people

HR practices on recruitment, pay and promotion that signal the behaviours a firm values.

Governance (cultural driver)

Structures, boards and controls that influence and monitor business decisions toward ethical outcomes.

Ethics framework

Overall structure by which a firm embeds, manages and oversees ethical commitments across four levels: commitment, leadership, operational and oversight.

Commitment (framework level)

Statements of values and codes of ethics setting high-level expectations.

Operational (framework level)

Policies, procedures and toolkits enabling employees to apply ethical standards in practice.

Oversight (framework level)

Monitoring and review mechanisms that gauge progress and ensure accountability.

Policy (operational tool)

Document giving detailed guidance on a specific ethical issue, e.g., anti-bribery or gifts and hospitality.

Procedure (operational tool)

Step-by-step instructions describing what to do in particular situations to manage ethical risks.

Training (operational tool)

Education on values, policies and decision-making skills to help staff handle ethical issues.

Job description (operational tool)

Role-specific duties embedding ethical requirements, e.g., considering fairness when pricing products.

Human resources (ethics role)

Integrates ethical competencies into hiring, promotion, reward and disciplinary processes.

Communications (operational tool)

Channels conveying consistent messages about ethical expectations, achievements and challenges.

Performance management

System measuring individual and firm progress against ethical objectives to provide feedback and support.

Governance (oversight function)

Determines organisational structure for ethics, including board responsibility and whether ethics is a standalone function.

Risk management

Identifies, aggregates and mitigates business risks, including ethical risks.

Compliance

Ensures adherence to internal and external requirements and tests control effectiveness.

Internal audit

Independent assurance that governance, risk management and compliance systems function properly.

Management Information (MI)

Data gathered to inform management decisions; crucial for tracking ethical inputs, outputs and outcomes.

Four MI principles

Accuracy, timeliness, relevance and consistency—qualities MI must have to support fair customer treatment.

Ethical outcome

A measurable result indicating how effectively a firm’s actions have delivered on ethical objectives or mitigated risks.

FCA TCF Outcome 1

Customers deal with firms where fair treatment is central to corporate culture.

FCA TCF Outcome 2

Products are designed to meet the needs of identified consumer groups and targeted accordingly.

FCA TCF Outcome 3

Consumers receive clear information before, during and after the point of sale.

FCA TCF Outcome 4

Advice provided is suitable and takes account of customers’ circumstances.

FCA TCF Outcome 5

Products perform as firms have led customers to expect; service meets promised standards.

FCA TCF Outcome 6

Consumers face no unreasonable post-sale barriers to change, switch, claim or complain.

Informed decision making

Positive behaviour where decision makers gather relevant information, including customer feedback, before acting.

Empowered decision making

Positive behaviour where staff understand authority limits and can flex decisions for fairer customer outcomes.

Open to challenge

Culture encouraging staff and customers to question decisions to ensure fairness.

Stakeholder

Individual or group affected by, or able to affect, a company’s activities and success.

Materiality assessment

Process of identifying, ranking and focusing on issues most important to priority stakeholders.

Twelve-step CSR process

Structured approach from identifying stakeholders to communicating improvements, guiding design and delivery of CSR programmes.

Ethical leadership (five steps)

Understand ethics language; craft ethical vision; shape decision-making; remove hurdles; model ethical behaviour.

Critical friend

Trusted colleague who provides honest feedback and advice on ethical challenges.

Fairness (ethical risk)

Risk that customers are treated inequitably, addressed through MI and FCA outcomes.

Professionalism

Combination of competence, integrity and ethical conduct expected of practitioners in financial services.

Accredited bodies’ annual statement

Document confirming an adviser’s qualifications, CPD completion and adherence to ethical standards each year.

Cross-selling (trust benefit)

Selling additional products to existing customers more easily because of increased trust from strong ethics.

Inducement

Form of remuneration or benefit that may bias advice or sales, raising ethical concerns.

Conflict of interest

Situation where personal or organisational interests could improperly influence professional judgement.

Continuous Professional Development (CPD)

Ongoing learning required to maintain competence and ethical standards in advisory roles.

Senior executive accountability

Regulatory focus making leaders personally answerable for decisions and conduct within their areas of responsibility.

Consumer outcome focus

Regulatory and ethical emphasis on the real-world effects products and services have on customers.