The financial industry has given us countless scandals and news stories about professionals who have defrauded investors, employers, and peers. There's no doubt that greed can be a powerful driving force but unethical behavior sometimes boils down to a lack of education regarding the basic principles of financial standards.

Handling Material Non-Public Information

Many professionals who deal with securities may come into possession of material non-public information. This is defined as anything that has yet to be made publicly available but might have an impact on the price of a security.

You would have received material non-public information if your company's CEO were to tell you during a meeting that upcoming earnings results are going to be disappointing. You may be tempted to call your broker and place a sell order to avoid a capital loss because you're a stockholder in your company. This would be classified as 澳洲幸运5官方开奖结果体彩网:insider trading and the penalties associated with this type of trading are far worse than any paper loss you might incur.

A portfolio manager who controls a large stake in several small-cap stocks may have a profound effect on short-term stock movement based on any substantial sales or purchases of said stocks. It would be unethical for the manager to alert a few "high-value" clients who may hold the stock independently before they sell their shares if the manager plans to exit a large position in a small-cap stock based on a recommendation from one of their firm's 澳洲幸运5官方开奖结果体彩网:buy-side analysts.

It may not seem like much but insider trading laws have likely bee𝄹n broken and the parties involved may be prosecuted.

Analysis Using Mosaic Theory

Insider information isn't a black-and-white concept. Professionals may stumble upon such information unwillingly or overhear conversations in and around the office. The topic becomes even cloudier for analysts who research companies and issue professional recommendations regarding their securities.

Directors have been known to give earnings outlooks during analyst m𝄹eetings before public release. This may or may not qualify as public information when a room full of analysts has received the information but trading on such information during or immediately following the meeting may be classified as insider trading.𝕴

The appropriate action in such a situation would be to urge the board to disclose the information immediately to the public. Trading or making any recommendations on the information is fair game when sufficient time has passed.

Analysts may gather a great amount of information from numerous sources, any of which may be public, material or non-material, as they compile information on companies and securities to build a clear picture of their 澳洲幸运5官方开奖结果体彩网:fair value. An analyst can reach conclusions that would be considered inside informat𓄧ion had it been communicated to them by a company insider.

Analysts are free to make recommendations based on their findings under the guidelines of the mosaic theory, however. This theory states that analysts are free to use public, material, and non-material information during their professional research. Conclusions they reach from that information are considered "fair game" and attributed to their research, not to insider information.

Reporting Unethical Activities

You may be thinking, "I'm an honest person and I wouldn't put myself in a situation where my ethical standards would be questioned." That may be true but professional ethics and standards go beyond the individual. Ethics is an industry-wide effort.

It's not enough to disassociate yourself from that individual if one of your coworkers or peers is involved in questionable activities. You may be included in any punitive actions resulting from these actions if you knowingly allow illegal or unethical activities to continue. Nobody wants to 澳洲幸运5官方开奖结果体彩网:blow the whistle on a coworker or frien🅰d but it's ultimately your responsibility to ensure fair practice in the financial industry and standing up for one's ethics should be most 🦋important.

Professionals can also encourage employers to create a workplace that puts less contradictory pressure on employees. Implementing a "澳洲幸运5官方开奖结果体彩网:Chinese Wall" between divisions such as a brokerage and an advisory division can limit leaks of inside information. It can keep brokers, advisors, analysts, an🔯d other professionals from being caught in the middle of a security breach.

The Bottom Line

Financial professionals have been involved in countless scandals and allegations of fraud over the years that have rocked the industry and given financial professionals a black eye. You can take a leading role in ensuring that the financial industry remains fair and transparent for everyone involved if you kꦿnow the guidelines to follow, encourage safeguards in the workplace, and hold yourself to the highesꦉt ethical standards.