Nature of Compliance


To be unaware of the ethical issues that have plagued the financial services industry we would have had to avoid newspapers, television and the radio.  Certainly everyone is aware of the unethical sales practices for which many of the biggest companies in the insurance industry were successfully sued.  In addition, company analysts' promoting to customers the stocks of companies that they privately disparage in order to obtain more of those companies' business suggests a level of cynicism and nihilism seldom encountered.

It is not surprising, then, that the call for an ethical renaissance has become increasingly loud.  With that call for an elevated level of ethical behavior has come a greater focus on enforceable ethical rules and the need for compliance with those rules.  

When we talk about compliance, we are really talking about particular rules of conduct -- in some cases made into law -- that are designed to promote the interests of all of the parties to a transaction.  Although it is certainly possible to act in a compliant way without being ethical, there is a direct connection between the two concepts.  If ethics, as the foundation of integrity and honesty, gives us optimum standards of conduct, compliance gives us minimum requirements of conduct.  If ethics tells us what we ought to do, compliance dictates what we must do.

So, although compliance certainly has its basis in ethics, it is not the same thing.  The person who acts ethically does the right thing; the person who is compliant stays out of the courtroom.  Ethical or professional conduct beyond what is required by the law is optional with the individual.  Compliance is a legal requirement.

Ethics comes into play with respect to:

the practitioners' sales tools
the practitioners' sales practices
what the practitioner says or fails to say
what the practitioner does or fails to do
the practitioners' interaction with clients or prospects, and
the practitioners' relationship with his or her company or companies.

Although avoiding unethical sales practices is certainly important, ethics includes far more than just sales practices.  It extends to all these areas.  One of the important results of increased ethical awareness is a favorable change in the public perception of the insurance agent and the stockbroker.