Chapter 1 Review


To summarize the role of ethics and compliance in the financial services transaction:  

It is a body of rules of conduct that promote the interests of all parties to the transaction;
Although distinct from ethics, compliance has its foundation in an ethical system;
The rules of compliance provide minimum conduct requirements while ethics provides optimum guidelines;
The rules of both ethics and compliance apply to the sales tools and practices of the agent;
Ethics extends to interaction with the client or prospect and with the company or companies that are represented; and
Changing the public image of the financial practitioner to one of a professional requires, among other things, adherence to a code of professional conduct;

Although professional status carries with it a cost in increased liability for life insurance agents, it may also help ensure the continuation of the agency distribution system.



Review Questions

Which of the following is the foundation of ethics for the financial services practitioner?

The Golden Rule
The legal system
Force
Compliance requirements

What makes a system of ethics essential?

A limited supply of goods
Because individuals exist in society
Its fairness
It is the only method to adjudicate disputes

The following is a fundamental method of resolving disputes.

Reason
Force
Both a and b
Neither a nor b


What is the common thread in unethical sales practices?

The practices were illegal
They misled the customer
They led to the customer’s monetary loss
They were forbidden by all insurers


Which of the following is NOT a necessary component of a profession?

Specialized knowledge
“Service before income” outlook
Opportunity for substantial income
A code of professional ethics