Explain Credibility: The Code of Conduct for the Stockbrokers (Essay Sample)

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ETHICAL PROBLEM IN MY COLLEGE PROGRAM
The Code of Conduct for the Stockbrokers
A professional stockbroker is an individual who has undergone the required training and is tasked with the duty to buy and sell stocks and other securities on behalf of a brokerage company. The trading activity of buying and securities in this case involves either the registered company clients, or retail basis, via over the counter style or through a stock exchange for bigger firms. For the success of any legal business to be realized there must always be rules and regulations together with codes of conduct to be followed by various stakeholders. In this, stockbrokers are obliged to follow the following codes of conduct during the business activities in order for the success of the business to be realized.
It is important to note that the stockbrokers’ ethical conduct codes are formulated by the Stockbrokers Association that has the responsibility of ensuring that every member abides by the codes failure to which the conduct is considered unprofessional and punishable in accordance with the law CITATION Ron14 \l 2057 (Francis and Armstrong). To start with, every stockbroker is obliged to obey the law as required by the legislation, together with the laws of the community, statutory laws, and even the self-regulated conducts of the securities CITATION Sig11 \l 2057 (Sigmund). Secondly, all the stockbrokers are expected to carry out their activities with a lot of integrity, honesty and in a manner that abides by the public interest. With this regard, members must always be fair to both the clients, fellow employees and even the employer firms while offering their services. Personal responsibility is the other code of ethic, and in this case, employees must always ensure that the relationship with the employer or the managers remain to be consistent with the set regulation.
The other ethical standards to be maintained and upheld by every member of the association include: Respect for the clients and their rights to privacy and confidentiality; Members must undergo proper training to ensure that their levels of competency are to the required standards; Betting and gambling are activities that are prohibited; Members are also expected to cooperate and offer support to each other where necessary CITATION Sig11 \l 2057 (Sigmund).
The major ethical issue that poses a great challenge to both the buyers, sellers, stock analyst and the broker is basically the conflict of interest CITATION Anc12 \l 2057 (Anca). This is an important aspect of ethics, not only to the brokerage companies, but also to the entire business world. The reason is that the conflict of interest mostly arises from failure to come to an agreement on issues dealing with payment after services, either in the form of wages, salaries or commissions. According to CITATION Eth \l 2057 (Abiodun and Oyeniyi), conflict of interest, simply means lack of conclusive agreements between private interests and responsibilities that are trust oriented. For brokerage business, conflict of interest is a very common encounter that must always be given a proper attention. Indeed, conflict of interest mainly arises from the stockbrokers mainly rely on commissions as their ultimate salaries.
Clients are also normally exposed to conflict of interest more so if they are customers of brokerage firms CITATION Eth \l 2057 (Abiodun and Oyeniyi). For instance, if a client decides to financial assistance or advice, whatever he may get may be completely different, since the companies are only interested in making profit through sales of products. If such a client approaches a broker who is also interested in earning commissions, then the broker will only influence the client to take the service or the product without necessarily taking a keen look at the relevance. In such cases, the result will be an automatic conflict of interest. Conflict of interest in brokerage service and commerce in general has three major sources CITATION Ron14 \l 2057 (Francis and Armstrong): Firstly, the managers sometimes put a lot of pressure on the brokers to ensure that clients have a view of the products and services without necessarily considering the relevance of such services. Secondly, managers normally get access to bonuses whenever the collection of revenues is high, hence they are likely to work every path to ensure that they get the bonuses by raising higher revenues. Thirdly, variations between fees and commissions on different products and services. For instance and annuity pays a commission of up to 7% when at the same time, structured notes only pays 3% commission.
On the other hand, conflict of interest has a role to play in any form of business activity CITATION Sig11 \l 2057 (Sigmund). Conflict of interest tests the level of transparency, more among those in managerial positions. It’s therefore very important that the employees and the employers are aware of the possibilities of conflicting interests among various stakeholders in the business. Both the stockbrokers and their employers are aware of their roles in operating and providing the services on behalf of the employer company. Through conflicting interests, new policies are made. In a company for instance, if the interest of the stockbrokers in the provision of a given service is different from that of the manager, then the two parties may have to come together to look for the way forward on the same. Through the discussions, decision making regarding the same services are made and from it, new regulations governing conduct of employees or the provision of a particular product are likely to be made CITATION Anc12 \l 2057 (Anca). In addition, conflicting interests between the clients and the stockbrokers may lead to an improvement in the quality of services or products offered, or higher commission rate to the stockbrokers. With regard to this, the managers are likely to get reports of employees who are not performing according to the standards set by the Company, or those who deviate from the normal ethics business practicing. Furthermore, information on other ways of offering services may also arise from such disagreements. In summary, conflicting interests encourages better representation of the business enterprises CITATION Sig11 \l 2057 (Sigmu...