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Ethics And Regulation In The Professional Asset Management Industry Essay

Ethics and Regulation in the Professional Asset Management Industry Asset management is an operation that involves the diligent management of the investor's funds in a professional way. The asset manager thus is an agent hired to do the job on account of his or her peculiar financial ability. Professional firms that are into asset management thus have duties not only to the investors, but also to the stock market, the financial and government bodies in keeping their activities above board. The managers are often entrusted with the task of dealing with billions of dollars or assets of like proportions. It is when dealing with such a huge cash flow that there comes the problem of ethical dilemmas. The unethical models of behavior has brought forth many regulations and guidelines that have been issued by the government and the financial agencies -- these form the laws and other than that the managers are obliged to follow an ethical code of conduct that form a part of the ethical standards. The manager shall thus adopt standards that are highly mindful of the interests of the investor. (Reilly; Brown, 2011)

Some of the laws that have been passed to regulate the industry include the 'Employee Retirement Income Security Act -- ERISA' for retirement asset managers and fiduciaries, 'Pension Protection Act of 2006' for pension fund sponsors and managers, and the securities laws for the asset management industry which began with the Securities Act of 1933 and the Securities Exchange Act of 1934 and many other acts like the Investment Company Act of 1940 and especially the Investment Adviser...

Later acts are the 'Dodd Wall Street' reform and the consumer acts. The clauses of these laws have to be obeyed and they are not obligatory but mandatory. Ethics however involves individual perception and have not the exact force of the law as these acts. (Reilly; Brown, 2011)
The Ethics, Law and the Fund Manager

The ethics of the managers may be based on the individual as argued before. Taking this further and devolving into the reasons why the actions of managers may not be always rational and also ethical, it has to be noted that financial and managerial are provided by individuals who are in organizations that are not based on rational actions because the organization comprises of multiple "egos, politics, and hidden agendas." (Schminke, 1998) Therefore the premise that managers will not always act rationally is a valid premise. Therefore ethical decision making depends on the manager being a rational decision maker also. Thus that premise being wrong, it is seen that ethical decision making likewise may twist the ethical dilemmas, and the solutions that the manager arrives at the best choice.

There are many issues that involve moral and ethical considerations in all spheres of investment. The field of activity being the financial markets, where many commodities, stocks and currencies are traded, the market itself has a basic ethical requirement to be fair, and the fairness in the market means the absence of unfair trading practices, and wrongful activities. These are sometimes left to the market itself to correct…

Sources used in this document:
References

Bines, Harvey E; Thel, Steve. (2004) "Investment Management Law and Regulation"

Aspen Publishers.

Boatright, John R. (2010) "Finance Ethics: Critical Issues in Theory and Practice"

John Wiley and Sons.
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