Lesson 5 of 6 · 11 min
Ethical standards versus legal standards
Laws often write ethical behaviour into rules, but law and ethics only overlap: some legal acts are unethical, some ethical acts are illegal, and ethical standards usually ask for more.
In short
- Many laws codify ethical actions, such as mandatory risk disclosures; complying benefits clients, you and your employer.
- Conduct falls into three zones: legal and ethical, legal but unethical, ethical but illegal.
- Legal but unethical: trading on material nonpublic information where no law forbids it; CFA Institute considers it unethical.
- Ethical but (possibly) illegal: civil disobedience and whistleblowing, which may break laws or employer policies.
- More regulation is not a complete fix: laws lag practice, can be vague, conflicting or narrow, create new loopholes, vary by jurisdiction and are interpreted to advantage.
- Legal standards are often rule based; ethical conduct goes beyond them and needs judgement about all stakeholders.
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