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Module 4 – Managing Risk by Making
Ethical Decisions
Section 1 – Ethics in the Financial Services Industry

SECTION ONE – ETHICS IN THE FINANCIAL SERVICES INDUSTRY
Guiding Values of the Financial Services Industry

The financial services industry has the following guiding values:
• Protecting your clients’ interests
• Honesty, integrity and fairness
• Professionalism
• Technical proficiency
• Confidentiality
These values are the core of the code of ethics of the financial services industry and are key to
your success as an adviser.
Reflective question – While you study this topic, ask yourself:

How can I best demonstrate these values and by doing so build and maintain a lasting
relationship with my client?
Protecting Your Clients’ Interests

WHAT DOES “PROTECTING YOUR CLIENTS’ INTERESTS” MEAN ?
Protecting your clients’ interests means that the client’s interests should always come first
above your own.
You (and your financial institution) hold your client’s assets and information about your client’s
personal affairs. You are responsible for showing the highest standard of care toward your client.
You are also responsible for carrying out your client’s intentions to the best of your ability.
Your client trusts you and your financial institution to act in her best interests even if doing so
works against your own interests.
Example
If Sarah recommends a particular investment to Jesse, he will rely on Sarah to have protected
his interests. Sarah has a responsibility to protect Jesse’s interestes above her own.
GUIDELINES
To put your clients’ interests above your own, follow these guidelines:
• Ensure your client fully understands the nature and scope of your recommendation.
• Fully advise your client about both the positive and negative possibilities of any dealing.
• If you see any possible conflicts of interest, tell your client.
• If your client’s needs extend beyond your personal expertise, seriously consider
recommending outside expert advice.
• Ensure you understand the information that you are presenting to your client and that the
information is as complete as possible.
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MODULE FOUR – MANAGING RISK BY MAKING ETHICAL DECISIONS
Example
Carrie wants to talk to Sarah about the index-linked GICs offered by Sarah’s financial
institution and how they work. Before their meeting, Sarah reviews the more complex details
with her mentor. Sarah wants to ensure the information she presents is as complete as possible.
She also wants to know that she can explain the pros and cons of this type of investment.
Honesty, Integrity and Fairness

HOW DO HONESTY, INTEGRITY AND FAIRNESS AFFECT YOUR RELATIONSHIP
WITH YOUR CLIENT?
Honesty, integrity and fairness are at the heart of your responsibility to your client. These values
help to build the trust that will enable you to maintain a successful and lasting relationship with
your client.
To demonstrate these values:
• prioritize your client’s interests;
• fully disclose both real and potential conflicts of interest;
• communicate openly and accurately with your client;
• protect your client’s assets.
Example
Sarah has just received her mutual fund licence and is meeting with Mr. Lalonde.
Mr. Lalonde would like to invest in an equity fund recommended by his neighbour. In the
spirit of open and accurate communications, Sarah reviews the important sections of the fund
prospectus with Mr. Lalonde. She explains to him the risk and return of the fund. She also
warns Mr. Lalonde that this fund is very volatile and is more appropriate for someone looking
to invest over the long term.
After a discussion about Mr. Lalonde’s risk tolerance and his objectives, the fund appears to be
appropriate. Mr. Lalonde decides to go ahead with his purchase decision. Sarah is confident
that she has done the right thing by openly and honestly communicating with Mr. Lalonde
instead of simply acting on his instructions.
Professionalism
WHAT IS PROFESSIONALISM AND HOW DOES IT SHOW?
Professionalism is exhibiting the skills and behaviour that are expected of your job. It shows
itself in how you carry out your client business and your personal business. Professionalism
is also demonstrated in how you relate to your colleagues in the workplace. Let’s look at
professionalism and how it relates to:
• client business.
• an adviser’s personal business.
4 © CANADIAN SECURITIES INSTITUTE (2016)

CLIENT BUSINESS
• Act only on your client’s instruction or after gaining your client’s approval to proceed.
Provide recommendations and service to your clients in only those areas in which you are
approved or registered.
• Offer your clients only approved securities and services. Ensure you follow all the applicable
rules when you record transactions.
Example
Liz meets with Sarah to make a deposit to her husband’s mutual fund account. Sarah explains
that she needs instructions from Liz’s husband, Joe, to make a deposit to his account.
Liz is upset because her husband is expecting the deposit to be made today. Sarah explains that
by following the correct procedure, she protects her husband’s account. Sarah suggests a few
alternatives that Liz can share with Joe so that he won’t have similar problems in the future.
AN ADVISER’S PERSONAL BUSINESS

To ensure that your personal business conduct reflects positively on yourself, your financial
institution and the financial services industry, follow these guidelines to demonstrate your
professionalism:
• Keep your personal business activity, particularly any trading activity, to a minimum.
Spending too much time on these activities violates your duty to your client.
Example
Mike researches opportunities and trades for his investment club account. He restricts this
activity to part of his lunch hour and after hours. He takes care to invest on the basis of terms
and conditions listed in his employment contract and maintains meticulous records of all
trading activity for the investment club account.
• Avoid financial dealings between yourself and your client. Such dealings can place you in
a conflict of interest. If you do have personal dealings between yourself and your client,
disclose these activities to your financial institution.
Example
Sarah and James are long-time partners in a hiking and guiding company. After recruiting
James as a new client, Sarah recommends that James take advantage of some new banking
services. She is planning to transfer all his accounts and savings from another financial
institution. Accordingly, Sarah informs her institution of her business relationship with James.
• Ensure that your outside activities reflect favourably on you. Avoid outside activities that
may negatively affect your professional image.
Example
Sarah contributes her financial expertise as a volunteer on the board of a local charity.
Unfortunately, time constraints have prevented her from filing the annual financial statement
on time. This situation reflects poorly on Sarah’s professional image.

Technical Proficiency
WHAT IS TECHNICAL PROFICIENCY AND HOW DOES IT SHOW?
Technical proficiency is the ability to competently
perform the required procedures.Maintaining your Technical proficiency depends
technical proficiency requires constantly expanding
and updating your professional knowledge. By on continuing your professional
keeping informed about new products, legislation development. You also need to
and regulations, you will be equipped to continue to be aware of and comply with all
effectively serve your clients. appropriate regulations.
By continuing your professional education,
you can ensure that you improve your knowledge
regarding the advice you give your clients. Accurate and complete knowledge translates into
stronger advice and recommendations. Your continuing education benefits your relationships with
your clients.
Example
Mike has learned that a local community college is offering a two-day workshop on identity
theft. He signs up for the course to update his knowledge of the latest threats in this area.
To work as an adviser, you must be aware of and comply with the laws and rules that
regulate the financial services industry. Ensure you understand and follow the industry’s
and your financial institution’s code of conduct or code of ethics.
To ensure you are performing your job correctly, you must do the following:
• Comply with appropriate securities acts and regulations.
Example
Jesse recently asked Sarah a question about the use of RRSP funds to fund his education. Sarah
checked the regulations to ensure that she answers the question correctly.
• Avoid improper use of insider information.
Example
Prior to the issue of a press release by Imagine Corp., Sarah learned that accounting system
errors would contribute to a quarterly loss, which would likely lower the company’s stock price.
Although she understands the effect of this information on her clients’ portfolios and her own
portfolio, Sarah knows that acting on the information immediately would be improperly using
“insider information.”

Confidentiality
WHAT IS CONFIDENTIALITY AND HOW CAN YOU PROTECT IT?
Confidentiality is maintaining the privacy of information and ensuring that only authorized people
can access it. Any information about a client’s financial status, transactions or wishes concerning
his financial status is confidential. Short of a court order or other appropriate authorization, this
information must not be disclosed to anyone without the client’s explicit permission.
Example
Jasmine owns a small business. She has brought Mike her company balance sheet to review
because it forms part of her application for a business credit card.
Mike’s wife is a Certified General Accountant (CGA). Asking her to review the balance sheet
would be a breach of confidentiality unless Mike had Jasmine’s permission to share
that information.
Confidentiality has two key aspects:
1. Personal client information
Your client’s identity, personal
information and financial
2. Use of confidential client information
circumstances are confidential.
Let’s take a closer look at these two aspects of
confidentiality.
PERSONAL CLIENT INFORMATION

You must ensure that your client’s identity, personal information and financial circumstances
remain confidential. Do not discuss this information with anyone outside the financial institution
or with anyone inside the financial institution who has no reason to know the client’s information.
Example
Each night before leaving the office, Sarah ensures that printed copies of her client list, the
financial institution’s client list and any other confidential records are stored in locked filing
cabinets. She also checks that she has closed all confidential applications and logged off the
corporate network.
USE OF CONFIDENTIAL CLIENT INFORMATION

Information about a client’s business activities or financial circumstances must never be used to
support the personal business of another individual. This requirement means that your client’s
confidential information cannot be used by you, your other clients, your colleagues or anyone
else who may benefit from the client’s business activities.
Actively avoid involving yourself in personal business activities that may appear to be affected by
knowledge of the client’s business activities.

Example
Mike has the difficult situation of having to meet with Mr. Dohmen, who has separated from
his wife. Mr. Dohmen wants to discuss his options to transfer his investments into a new
investment account.
Mrs. Dohmen is also a client that Mike meets with to discuss her retirement planning options.
Mike makes sure that he keeps his dealings with Mr. Dohmen separate and distinct from his
dealings with Mrs. Dohmen. By ensuring that each client does not learn about the other’s
business, Mike is able to keep each client’s information confidential.
Putting It to Work!
Now that you’ve learned about ethics in the financial services industry, let’s take a look at how
ethics can help you work with your clients. Use the guiding values checklist to assess how this
adviser does.
Example
Scott starts his day by reading the financial newspapers. Reviewing the business news helps
Scott to get up to speed on what’s happening in the business world. He notices that due to a
recent federal budget change, clients can now withdraw more funds from their RRSPs under
the home buyers’ plan. He makes a note to himself to do some more research so he can share
the information with his clients.
Scott meets with his first clients of the day, Mr. and Mrs. Rossi.
The Rossis want to apply for a loan to purchase a boat that Mr. Rossi has always wanted.
Unfortunately, Mrs. Rossi has had some bad experiences with her credit cards and has a less
than perfect credit bureau report. As a result, the loan is declined. Scott gently explains to
Mr. and Mrs. Rossi why the loan wasn’t approved. He suggests how the Rossis can improve
their credit rating so they can avoid this situation in the future.
After the Rossis leave, Scott prepares for a staff sales meeting. Because he will be gone for more
than an hour, he makes sure that his desk is free of client documents and that his computer
is locked.
Scott’s day is almost over. He is eager to get home, but he has one last client who wants to open
a Tax-Free Savings Account (TFSA). In a rush, Scott takes the client’s information, selects an
investment and opens the account. In his rush, Scott forgets to tell the client how the account
operates, to explain the account’s fees and to inform his client of the tax benefits.

Let’s see how Scott did in following the guiding values:
The Guiding Values Yes No

Demonstrated protecting clients’ interests
Demonstrated honesty, integrity and fairness
Demonstrated professionalism
Demonstrated technical proficiency
Demonstrated confidentiality

Ethical Decisions
Section 2 – The Importance of Ethics to an Organization

SECTION TWO – THE IMPORTANCE OF ETHICS TO AN ORGANIZATION
Concept of Ethics
Ethics can help you to “do the right thing.” Ethics guide your professional and personal behaviour.
Ethics also help in decision making. When you and your client share the same ethics, mutual
understanding is simpler. When you and your organization share the same ethics, you both
understand “how things are done.”

How do ethics contribute to my relationship with my client?
A Dynamic Process
VALUES BEHAVIOUR ACTION
Ethical action is dynamic. Our values influence our behaviour, which causes us to act in one way
or another. Ethical action begins with you and moves outward to embrace others.
Example
Sarah is advising Suresh about an annuity. If Suresh pays for it in a single premium, Sarah earns
a higher commission. Suresh would prefer to pay in a series of installments. Sarah understands
that ethically, she needs to advise Suresh on the basis of how his annuity will be paid and how
payments would be affected by different premium options, regardless of her own interests.
The Goal of Ethical Behaviour

ETHICAL BEHAVIOUR CREATES TRUST
Trust unites individuals and groups. Your client trusts you and your firm. Your relationship with
your firm relies on mutual trust. A relationship built on trust will last and will lead to additional
opportunities for doing business together.
Example
Suresh is buying an annuity at least 10 years before he retires. He will be dealing with Sarah for
10 years and possibly longer. During this time, he will probably seek Sarah’s advice on other
investments and retirement planning activities.
Every time Sarah communicates with Suresh, she will demonstrate her honesty, integrity
and professionalism. The trust in their relationship will build on the basis of Sarah’s ethical
behaviour. Similarly, Suresh, in sharing how he thinks, demonstrates his ethical behaviour
to Sarah.
Sarah recognizes that just by talking with her, Suresh is showing a certain amount of trust. She
wants to build on this trust. In her dealings with Suresh, Sarah puts special effort into showing
that she knows the difference between ethical and unethical behaviour and that she will always
be honest with him.

Trust as a Direct Result of Ethical Behaviour

Clients need to trust their advisers to ensure the
success of their financial dealings. The financial services Clients need an incentive to
industry, including your organization, encourages this
trust by supporting ethical behaviour and refusing to trust you. Ethical behaviour
tolerate unethical behaviour. encourages trust.
As an adviser, you have the responsibility as a
professional to increase the trust level between you and your client.

How can I build trust with my clients by demonstrating my ethics?
Ethical Factors Required to Build Trust

Certain factors must be in place for a client to begin to trust you.
Let’s look closer at these factors.
Factor Examples
• Incentives to succeed • Suresh needs to know that if he trusts Sarah, his financial
must be in place for dealings will have a higher likelihood of success.
trust to exist.
• The financial services • Suresh must believe that both Sarah’s financial institution
industry supports and the industry as a whole will do their best to support
ethical behaviour and trust-building actions. Suresh must also believe that an
does not tolerate adviser who behaves unethically will be punished.
unethical behaviour.
• A financial institution’s • By choosing Sarah’s financial institution for advice, Suresh is
reputation serves as already showing trust. Suresh’s actions show his belief in the
a recommendation to financial institution’s underlying honesty, ethical behaviour
the client. and competence.
• The adviser is • By talking with Sarah, Suresh is demonstrating trust. From
responsible for their first meeting forward, Sarah has the responsibility to
increasing trust. increase the trust level between herself and Suresh.

Setting the Stage to Create Trust

Advisers “set the stage” for creating trust in
three ways: Trustworthiness builds trust.
1. By demonstrating trustworthiness Unrealistic expectations and
2. By addressing unrealistic client expectations unwinnable situations work
against trust.
3. By avoiding unwinnable situations
Your skill in these areas will be beneficial for both
yourself and your clients. Clients have greater trust in skillful advisers. Clients are also more likely
to do business with such advisers.

How can I show trustworthiness and work against unrealistic expectations and unwinnable
situations in my dealings with clients?
Elements of Trustworthiness
You can show trustworthiness in three ways:
1. Honestly disclose information.
2. Share influence in decision making with your client.
3. Share control and ownership of decisions with your client.
Let’s look closer at how these elements demonstrate trustworthiness.
Element Examples
• Honestly disclose • The more open the information that passes between you and
information your client, the greater the likelihood that a strong bond of trust
will form.
• Share influence • Your clients must know that information they provide will
influence decisions. By making sure your clients play an active
part in decision making, you ensure that they are responsible and
accountable for the decisions you make together.
• Share control and • Clients who feel ownership in the decisions that are made will feel
ownership a sense of control over their own security. Feeling manipulated or
patronized destroys this sense of control and reduces trust.

Unrealistic Expectations
Unrealistic expectations arise when you are expecting an outcome that differs from what is
actually possible.
Example
James has purchased a condominium at a discount because the seller wanted a quick closing
date. James agreed to the terms but now needs to arrange a mortgage on the property.
James meets with Mike to apply for a mortgage. He explains the situation and tells James that
the mortgage needs to be ready for the end of the week. Mike knows this timeline is impossible
because his institution needs at least two weeks to prepare the mortgage documentation. Mike
is unsure of what to say to James because he also wants to help him out.
Unwinnable Situations
As an adviser, you will likely encounter clients who refuse to see reality as it truly is. Some clients
see rules as applying to everyone else, but not to themselves. Because such clients are not being
honest with themselves, they are not acting ethically with you.
If working with such a client threatens your own ethics, the situation is “unwinnable.” You must
decide on the basis of your own integrity as a professional whether you can continue working
with the client.
Example
Sarah’s new client, Allan, has come to review his business statements and goals. When Sarah
notes that his cash flow appears to be low, Allan refuses to tell her more about his business. He
also tells her that he thinks her advice is biased.
Sarah knows that, ethically, she needs to carefully and clearly show Allan the reality of the
situation. She needs to ensure that his expectations are realistic and that he makes investment
decisions on the basis of true information. Proceeding otherwise may put Sarah’s honesty and
integrity at risk and may also lead Allan to make bad decisions.
Putting It to Work!
HOW WILL YOU SET THE STAGE FOR BUILDING TRUST WITH YOUR CLIENTS ?
Your day-to-day dealings can either build or erode your client’s level of trust in you. Showing
trustworthiness has a positive effect. Unrealistic expectations and “unwinnable” situations have a
negative effect.
As an adviser, you have the responsibility to find the balance that nurtures trust:
• Demonstrate your honesty by fully disclosing all information relevant to your client and his
business decisions.
• Confront unrealistic expectations with clear, accurate and complete information.
• Remove yourself from unwinnable situations that present ethical dilemmas.

Example
Mrs. Smith is 68 years old and is meeting with you for the first time.
Her trust in you is on the basis of a recommendation from her friend, who has dealt with your
institution for many years. Mrs. Smith needs an account for day-to-day banking. You need to
start building trust with her right away.
After discussing her financial needs, you need to help Mrs. Smith decide on the type of account
she should open. She was very interested in a no-fee, high-interest account that she read about
in a brochure. She tells you that she has a similar account at another bank, and she’s been
happy to earn a little interest.
You point out to Mrs. Smith that this account is ideal for saving, but it’s not meant for day-
to-day transactions, which is what she needs. You suggest a chequing account that offers a
discount for seniors. Although the account has a low interest rate, it seems to fit her needs.
“Could I get the higher interest rate on this account?” Mrs. Smith asks.
You explain that you can’t change the rates on the accounts for individual customers, but you’d
be happy to review the features and benefits of the accounts with her again.
“Don’t you give away anything to new customers?” she asks. “There are other banks, you know. They
might give me a higher interest rate to prove they want my business.”
You explain to Mrs. Smith that your institution certainly wants her business, but you can’t
break the rules.
She stares at you for a moment. “All right,” she replies. “You can go ahead with the chequing
account, then.”

Ethical Decisions
Section 3 – Ethical Dilemmas When Working

With Your Client
SECTION THREE – ETHICAL DILEMMAS WHEN WORKING WITH YOUR CLIENT
When Our Values Clash

TOPIC INTRODUCTION
An ethical dilemma exists when two or more of the possible alternatives pit different values
against each other.
Clashes in values fall into two categories:
1. Right versus wrong issues
2. Right versus right dilemmas
Successfully resolving conflicts between values is your key to ethical behaviour and to maintaining
strong relationships with your clients.

If my values conflict with those of my client how can I describe the difference?
Right Versus Wrong Issues

When confronted by a “right versus wrong” issue, making the right choice is usually
straightforward. Making the right choice is easy when:
• one choice is clearly illegal;
• one choice involves a lie;
• the negative effects of a choice outweigh any possible positive effects;
• one choice violates an explicit or implicit code of conduct.
Codes of conduct, codes of ethics and compliance policies provide guidance on right versus
wrong issues.
Example
Naheed is meeting with Sarah to discuss his mutual fund portfolio. He mentions that the
company he works for is about to merge with a competitor. Naheed expects that the stock
prices of both companies will increase. He tells Sarah that he wants to buy some stock.
Sarah recognizes that Naheed’s information is “insider information.” She explains that Naheed
won’t be able to make the purchase because his knowledge is insider information. Trading on
insider information is illegal and violates the financial services industry’s code of ethics.
Right Versus Right Dilemmas

In “right versus right” dilemmas, none of the possible solutions to the problem appears to be
clearly wrong. Each solution may have a certain amount of rightness. Determining the ethical
choice in such a situation can be difficult.

Example
Naheed and Mike have discussed Naheed’s interest in investing a lump sum in a particular
ethical fund. Mike has just read some confidential information. The value of that fund might
drop as the news spreads. Instead of placing Naheed’s contribution in that fund, Mike suggests
Naheed place the money in a different ethical fund that is performing well and should not be
affected by the news.
In this situation, Mike is faced with the dilemma of helping a client out on the basis of
confidential information. If he does not use the confidential information, the client is likely
to lose out on his investment. If he uses the confidential information and guides the client to
another fund, the client is likely to benefit but Mike may be violating the rule of not using
confidential information.
Putting It to Work!
HOW WILL YOU DECIDE BETWEEN ALTERNATIVES THAT CONTAIN SOME
RIGHTNESS ?
Making decisions between alternatives that contain some rightness requires careful analysis:
• Clarify what is right about each of the possible alternatives.
• Identify the conflict between the possible alternatives.
• In making your recommendations, clearly present both the “upside” and the “downside.”
Your client’s judgement of what is right may differ from yours.
• Your client may need some time to make a decision. If your client needs more time,
follow up later.
When you carefully analyze the alternatives and present your recommendation, your client will
recognize that you are acting ethically.
Example
Sarah is deciding between two different funds for her client’s investment. Fund A has been
generating an annual return of 9%, whereas Fund B has been generating a return of 11%.
Fund A pays a higher sales commission. The client is not a sophisticated investor and probably
would not notice the difference. Sarah also knows that past performance of a fund doesn’t
guarantee future performance and that other factors can affect the investment choice.
Knowing that the client depends upon her for the best investment advice, Sarah investigates
further. Sarah finally decides to place the client’s money in Fund B. Although Sarah didn’t
make as much commission as she might have, she acted ethically by placing her client’s
interests before her own. Sarah demonstrated integrity and reinforced her ethical behaviour.

Types of Ethical Dilemmas

When ethical dilemmas are divided up, they can be clearer to understand. This understanding will
help you to make an ethical decision.
Let’s look at four types of ethical dilemmas:
1. Integrity Dilemmas
2. Societal Dilemmas
3. Goal-Based Dilemmas
4. Fairness Dilemmas

Which values are in conflict in different types of ethical dilemmas?
Integrity Dilemmas
An integrity dilemma occurs when the values of honesty or integrity clash with commitment,
personal responsibility or keeping a promise.
Example
Sarah is recommending an in-house investment product to Bob. Solely on the basis of return,
this product is competitive with comparable products, but some other products on the market
show better returns. Bob asks Sarah whether the product is the best on the market.
Truth demands that Sarah inform Bob about the products that are performing better. She also
needs to advise Bob that the current performance doesn’t mean those products will continue to
show superior performance over the long term.
Loyalty to her firm demands that Sarah support the in-house product.
Societal Dilemmas
A societal dilemma occurs when the rights or values of an individual clash with the rights or
values of a group, or society. Examples of this dilemma include “us” versus “them” and minority
interests versus majority interests.
Example
Sarah faces a dilemma in deciding whether to propose certain tax avoidance strategies, which
are technically legal but morally questionable. For example, it is in the interest of an individual
business to pay as little tax as possible on profits. On the other hand, it is in the interest of
society as a whole to collect taxes to fund public goods and services. The less tax paid by each
business, the fewer funds available in the public coffers, and the more difficult it becomes to
fund public projects that benefit the group.

Goal-Based Dilemmas
A goal-based dilemma occurs when immediate needs or wants conflict with future, or long-term,
goals. In some cases, the way (means) to achieve an end goal clashes with the goal itself.
Example
Sarah’s client wants to invest in a financial product, but Sarah feels it doesn’t match the client’s
risk tolerance level. Sarah shares her thoughts, but the client insists on purchasing it.
Should Sarah complete the transaction? In the short term, the investment will probably make
money and she would be following the client’s wishes. Or, should Sarah strongly object and
repeat her warning that the client could lose his money, which works against his long-term
goals? Sarah also needs to consider the effect on her long-term relationship with this client.
Fairness Dilemmas
A fairness dilemma occurs when the values of fairness, equity and morality are in conflict with
feelings of compassion, empathy and love.
Example
Sarah recently learned that one of her colleagues, who was feeling swamped, decided she didn’t
have time to take a seminar to fulfill her continuing education requirements. Her colleague
opted instead to take the Web-based course. Another colleague, who had just taken the course,
gave the friend the quiz answers.
Someone found out that the quiz answers being handed over and alerted the colleague’s
supervisor. The supervisor’s ethical dilemma is whether to discipline the person publicly, as
an example to other advisers who might consider cheating (this action would be fair) or to
privately insist that the adviser take the seminar, warning her of the consequences of cheating
(which would demonstrate compassion).
Identifying the Core Values in Conflict

Each of the four ethical dilemma types shows the core values that are in conflict. By
understanding and applying the dilemma types, you will be able to clarify issues and reveal which
of your core values are at odds with each other—and which values are demanding attention.
Unfortunately, identifying the core values in conflict does not mean that the decision will be
easier!
Example
Murray has been a mutual fund adviser for more than 25 years and has a large book of clients.
A reorganization has recently taken place at his institution. As a result, in the future, Murray
will not be able to service more than 100 accounts.
Murray is faced with a dilemma. What should he do about his elderly clients who rely on
him, but do not meet the new “high-net worth” levels his client base is supposed to meet. His

wealthy clients’ children have accounts that also do not meet the new levels. Letting go of these
accounts could affect his future earnings.
Similar to this scenario, most of the ethical decisions you face on a daily basis are not clear-cut,
right or wrong decisions. Murray faces a situation that offers a number of possible courses of
action, each showing a certain degree of rightness.
Murray’s core value that is clashing in the short term is compliance with his company’s policies.
The values to consider in the long term are his professionalism, his financial well-being, his
fiduciary responsibility to his clients and his integrity.
Avoiding Excuses
As you work toward your decision, avoid rationalizations such as “It doesn’t hurt anyone” or “That’s
the way it’s always been done.” These easy answers are only excuses for making a decision that
conflicts with your values.
Putting It to Work!
HOW DOES BEING AWARE OF THE NATURE OF ETHICAL DILEMMAS HELP ME TO
BUILD TRUST WITH MY CLIENTS ?
As an adviser, you should be working every day to build trust in your dealings with your clients
and colleagues. Resolving ethical conflicts and acting with integrity builds your credibility and
professionalism and demonstrates your trustworthiness.
The time and thought you put into these difficult decisions should strengthen your sense of what
is right and what is wrong when you encounter more complex situations. Your awareness of the
challenge involved in some ethical decisions can also demonstrate your fairness.
Example
As a rookie adviser, you work late into the evening. Often, you are the last one to leave the
office. One night, you walk past the office of your mentor, a well-established and successful
adviser in your office. You notice that the door is not fully closed. Because you have wondered
what it would be like to work in a big office with a nice view, you decide to sit behind his desk.
While enjoying the view, you notice on the desk a thick document with the title “Prospect List.”
Seeing the document, you recall your earlier conversation with your mentor, in which he
offered to share some of his most effective prospecting methods. You start to reason that if your
mentor was willing to counsel you on prospecting, then he might not mind if you took a copy
of the list for yourself. Maybe you will find some prospects on the list that your mentor hasn’t
even had time to contact. Your thoughts wander. If some of these prospects became your own,
you might finally have a chance to be recognized as rookie of the month. If you made rookie of
the month, your mentor would also receive credit for your performance.
You need to decide whether to copy the prospect list or to simply leave it. What would be the
ethical choice?

Ethical Decisions
Section 4 – Using “Know Your Client” to Manage Risks

SECTION FOUR – USING “KNOW YOUR CLIENT” TO MANAGE RISKS
The Importance of the Know Your Client (KYC) Rule

You need to know your client first. Only then can
you understand the investments and other financial
transactions that will be suitable for your client. Knowing your client enables
you to make suitable investment
The suitability of your recommendations flows from:
recommendations. Knowing
• a personal and financial knowledge of your your client also protects you,
client;
your financial institution and
• knowledge of the products you are your client against fraud.
recommending.
Combining both types of knowledge is the basis for
the Know Your Client (KYC) rule.
Guarding Against Fraud

You may be targeted by unscrupulous or unethical individuals. For this reason, make sure you give
the KYC rule your full attention.
Lack of vigilance can lead to fraud. As a result of fraud, you and your employer can experience
severe consequences, including prosecution for criminal or civil liability.
As an adviser who has direct contact with clients, you play an important role in combating and
detecting money laundering and terrorist financing activities.

What information about my client do I need to know to ensure that I truly know the client
I am working with and that I am advising my client suitably?
Beyond the KYC Rule

In addition to knowing basic personal information about your client, you must also know who
you are doing business with. This knowledge will help you to make recommendations appropriate
to your client’s profile. At the very least, you should to learn the following information about
each client:
• Investment objectives
Follow your institution’s policies
• Financial circumstances
and practices regarding client
• Personal goals identification and verification.
• Risk profile

How does the Know Your Client rule protect me, my financial institution, and the client from
financial harm or fraud?

Asking Your Client the Right Questions

You need to collect the following information from your client:
PERSONAL INFORMATION
• Name (including any name changes)
You must learn about your
• Age (age affects financial needs and goals, clients’ personal lives and about
investment time horizon and risk tolerance)
their approach to investing.
• Address
• Residency or Citizenship
• Marital status and dependants (changes can affect the client’s needs)
FINANCIAL INFORMATION
• Financial status (e.g., income needs, net worth and existing investments) and goals
• Investment knowledge and objectives (which can change over time and can affect how well
the client understands your recommendations)
• Risk tolerance (i.e., high, medium or low)
MEETING FACE TO FACE

Remember that according to the KYC rule, you must have a face-to-face meeting with your
client. Do not conduct business on the strength of a telephone conversation.
VALIDATING INFORMATION
Validating the information may be as easy as inquiring whether your client lives at the same
address and works for the same employer each time you have a face-to-face meeting. Particularly
in phone conversations, you want to be sure of the identification of the person you are speaking
with before disclosing any information and before taking any instructions.
MAINTAINING INFORMATION
Because information about a client can change over time, you need to keep these records up
to date. A change in the client’s circumstances, such as a divorce or the purchase of a home,
may alter a client’s financial wants and needs. An inheritance can explain a large deposit that
otherwise would appear “irregular.”
ASKING QUESTIONS
How you ask questions can also contribute to how well you know your client and to the
completeness of your information. In conversation with your client, try to ask open-ended
questions. Avoid asking questions that can be answered with a simple “yes” or “no.” Asking the
same question, but phrased slightly differently can draw out valuable information and can clarify a
client’s thinking.

DIGGING DEEPER
Use the following questions to clarify your understanding of your client. These questions can flag
a potential risk:
• Is the client who she says she is? Could the client be acting for someone else?
• In the case of a business, who benefits from the profits?
• On the basis of the client profile, does a particular transaction make sense or not? Do you
suspect that “something is not quite right”?
• On the basis of the client profile, which investments fit and which do not?
• If the client is acting on behalf of another person (e.g., an aged parent or other dependant),
how do you ensure that the interests of the third party are best protected?
• If your client loses money because of a riskier investment, will you be blamed, or will the
client accept that the investment fits his profile?
TWO PRECAUTIONS
Keep the following two precautions in mind:
1. Avoid making assumptions.
2. Be prepared to not accept information at face value.
In some cases, you should corroborate information against a second source or by investigating
further. Although trusting your instincts may not seem scientific, it may prove worthwhile in
the end.
Example
Mike meets with a new client, Jim, to complete a mortgage application for a rental property
that Jim is buying. Jim tells Mike that he works for JSK Manufacturing and makes $65,000
per year. JSK is a large company that Mike knows well and the salary figure seems appropriate
for the job, but Mike still asks Jim to provide him with a letter from JSK with his employment
details. Jim leaves the office and doesn’t return.
Balancing Service With Due Diligence

Being diligent and providing excellent and personable service can be a balancing act. Occasionally,
you may need to remind yourself and your client that rules are in place to protect everyone. As
a professional, you are responsible for keeping up to date on information requirements and on
situations that could lead to bad investment choices, misconduct or fraud.

EXAMPLES OF DUE DILIGENCE

Being diligent about knowing your client and knowing
who you are dealing with can be as simple as the You may need to remind clients
following:
that rules are in place to protect
• Keep clear and thorough notes of your everyone.
conversations with clients.
• Keep clear and thorough notes of the actions
you took in reviewing a particular file.
• Verify a new client’s business details on the Internet.
• Ask yourself: “Does this transaction make sense for this client?”
• Ask yourself: “Does this transaction fit with this client’s behaviour?”
Some accounts may require more diligence than others.
DO NOT BE LED ASTRAY

New advisers may be led astray by more experienced colleagues who do not adhere strictly to
the rules. Handling such situations requires tact. Remember, if you have to defend yourself later,
do you really want to say “I did it because she told me to” or “He said I didn’t have to worry about
that”?
LIABILITY
Suppose a document or information you put forward contains errors or falsehoods. If a financial
institution accepts and acts on that information, you are liable for the original wrong or false
information. Particularly in cases of fraud, problems may not be detected immediately, but can
have serious repercussions later.
The more informed you are, the more effectively you will be able to show diligence even while
you respond to your clients’ needs and requests.
Example
During a discussion of his mutual fund investments, Bob tells Sarah that he would like to
make an investment for his house-bound mother. He tells Sarah his mother’s RRIF account
number and gives her instructions on the change to make.
Sarah asks Bob whether he has power of attorney for his mother’s financial affairs. He replies
no, but reminds Sarah that his mother is house-bound. Sarah seeks out the forms required by
the financial institution for Bob’s mother to approve transactions done on her behalf by Bob.

Putting It to Work!
IS YOUR SKILL OF KNOWING YOUR CLIENT AS STRONG AS IT SHOULD BE ?
If you follow the tips below, your skill of knowing your client will be as strong as it should be.
Remember to focus on the following:
• Know your institution’s specific client requirements.
• Form questions that help you to collect client information.
• Understand how to complete the correct account forms to collect client information.
• Keep your clients’ information secure.
• Balance due diligence with customer service.
Example
Mrs. Sanchez visits Sarah’s branch to open a new business line of credit. Sarah asks for some
information about her company and personal circumstances. Mrs. Sanchez says she finds the
questions intrusive.
“I don’t mean to intrude,” Sarah says, “but I do need to ask you some questions. The bank requires
this information. I can’t complete your application until I learn more about you.”

Ethical Decisions
Section 5 – Recognize Unusual Business Activities

SECTION FIVE – RECOGNIZE UNUSUAL BUSINESS ACTIVITIES
Red Flags and Suspicious Behaviour

Red flags and suspicious behaviour should alert you to the possibility of risk. This alert should
lead you to question information and behaviour and to probe further, or “do some digging.”
You may uncover fraud.

What red flags and suspicious behaviour should I be watching for to avoid the risk of fraud?
Examples of Red Flags and Suspicious Behaviour

Managing risk and preventing fraud are part of your responsibilities to your clients and to the
financial institution for which you work. You need to know the red flags and suspicious behaviour
to look for and how to recognize them.
Red flags and suspicious behaviour include the following:
• Figures or stories that do not make sense (“things that don’t add up”).
• Missing information; information that cannot be corroborated; missing, illegible or
incomplete documents.
• Discrepancies in key identifiers (such as a social insurance number) in different documents
or in documents received from clients compared with documents received from a third
party, such as a credit bureau.
• Incomplete answers or refusals to provide answers; errors in chronological information;
discrepancies between information provided by a client and details revealed by an employer.
• Unusual transactions, such as an investment or deposit that does not follow the client’s
usual pattern for such transactions.
• Cash transactions (The practice of using cash, particularly in larger amounts, varies among
cultural groups and age groups. Being aware of these differences can help you recognize
what is and is not a risk).
As you gain experience, you will recognize additional examples of suspicious behvaviour.
However, remember that fraudsters are quick to learn new ways to take advantage of others.
Putting It to Work!
DO ALL MISTAKES IN THE INFORMATION PROVIDED BY CLIENTS CONTRIBUTE TO
FRAUD ?
In a word, no. Clients can make mistakes. Clients may also have events in their lives that they
are uncomfortable about or embarrassed about (for example, a broken employment history or a
financial loss due to loaning money to an untrustworthy friend or family member).
As an adviser who acts with integrity and professionalism, your role is to diligently question
information that either seems suspicious or does not make sense. You can then determine the
facts. Although the facts may paint a picture that is less than ideal, you may find that dishonesty
or potential fraud are not involved.

When you investigate information with discrepancies, such as financial information provided by
your client compared with the results of a credit bureau report, you may uncover errors in the
credit bureau’s information or, worse, that your client is the victim of a previously undetected
identity theft. Your initial diligence can prevent the situation from worsening.
Example
In support of her mortgage application, a client faxed a letter from her employer confirming
her employment. Although the corporate logo was blurred, Sarah didn’t flag it as a problem
because the client’s file contained other documentation confirming her place of employment.
However, when Sarah was completing a standard follow-up with the employer, she learned that
a final paragraph of the original letter had been removed. That paragraph mentioned that the
employee would be returning to work on only a part-time basis.
Sarah was able to confirm that the part-time salary earned by her client would be sufficient to
cover the client’s financial needs.
Sarah knows that her client has been dishonest in modifying the letter. Sarah concludes,
however, that because the client should be able to make the payments, the dishonesty does not
amount to fraud but she needs to address the issue of dishonesty with her client.
Safeguards Against Fraud

Safeguarding confidential, personal and financial information is a shared responsibility between
clients and financial services providers. Contributing to this effort at each financial institution are
information technology (IT) professionals, policies and systems.

What are the two simplest information security practices that both my clients and I can use to
protect confidential personal information, including financial information?
Examples of Information Security Practices

At a minimum, you should follow these common information security practices:
• Use passwords that are specific to a computer workstation and specific to an application.
Ensure that you change your passwords frequently. Do not use passwords that are easily
guessed (e.g., names of your children or pets).
• Shut down your computer and lock file cabinets, drawers and offices when you are away
from your desk.
• Avoid a reputation with your clients for being lax with security. This kind of reputation
could result in your being a target for fraud.
• In phone conversations, take care to confirm the identity of the person with whom you are
speaking before you reveal personal or confidential information. (Do not reveal confidential
information while confirming the person’s identity.)
• Close clients’ records when they are not in use. Follow a “clean desk” policy.

• Do not discuss private or sensitive information in elevators, corridors or on public transit.

When you use an elevator or walk through public areas, ensure that such information is
stored in folders or, at the very least, is held “face down.”
• Be aware of the resources at your financial institution that you can use to quickly and easily
confirm client information.
• Follow your financial institution’s policy about the documents that should not be recycled
but should be disposed of in confidential shredding receptacles.
• Know the risks involved in using your home computer or computer centres for business.
Because these computers are outside of the corporate network, their firewalls and
encryption tools cannot protect you to the same degree as your financial institution’s
computers (This includes avoiding web based email programs to send and receive files to
and from your office).
• Recognize that a laptop can contain a huge amount of sensitive information. Remember that
storing a laptop in your vehicle’s trunk is not safe.
Information Systems Security

WHAT MORE CAN BE DONE TO PROTECT THE SECURITY OF INFORMATION ?
All financial institutions use precautionary measures to ensure the security of personal
information, including client financial information. These precautionary measures include
dedicated IT professionals, policies and systems.
Security systems and rules are only as good as the humans who use or do not use them. As a
professional, you have the obligation to take security seriously. Refuse to be the person who
renders all the effort pointless.
Example
Sarah uses eight different software applications during the course of her day. The IT
department has told her that she must use a different password for each of the different
applications.
It’s close to RRSP deadline. In the last couple of weeks, work has been more frantic than usual.
Sarah is frazzled. Luckily, she uses a simple system to change and memorize her passwords:
she selects a number related to the date, then a word or two from her favourite song lyrics,
plus two randomly chosen symbols. Then she repeats the password to herself several times
before she moves on to her next task. When Sarah needs to change passwords for a different
application, she chooses different lyrics and symbols, but sticks to the same overall pattern.
Despite the stress Sarah is experiencing at work, she can switch her passwords smoothly
without needing to write them down.

Putting It to Work!
HOW CAN YOU APPLY WHAT YOU’VE LEARNED ABOUT SAFEGUARDS AGAINST
FRAUD AND INFORMATION SYSTEMS SECURITY?
You just learned approximately 10 commonly applied information security practices.
First, draw up a list of your own practices for securing confidential information for both your
clients and your financial institution. Compare your list to the list in this section. Check off items
that are common to both lists. Finally, and most importantly, add any unchecked items from the
list in this section to your daily information security practices. At the end of the month, you will
have improved how you handle sensitive, private and confidential information.
Example
Sarah receives a phone call from her client, Liz. Sarah and Liz have not spoken for some time.
In greeting Liz (and while displaying Liz’s client record on the system), Sarah says, “As I recall,
the last time we spoke, you were working for Company X.” (Company X is not the name of the
company shown in Liz’s record.) Sarah’s use of this fictitious name has two purposes: she can
check the information in Liz’s record and she avoids revealing Liz’s true employer to a caller
who might be claiming to be Liz.
In conversation with Liz, Sarah learns that Liz is the executrix of her deceased aunt’s estate. Liz
is cleaning out several years’ worth of her aunt’s bank statements and other financial records.
Sarah first cautions Liz not to dispose of any records or documents that may be needed in
the future by financial institutions, Canada Revenue Agency or other organizations, such as
charities to which bequests were made. Sarah then reminds Liz to shred any documents that do
not need to be saved before disposing of them. She advises Liz that a cross-cut shredder is safest
because this type of shredder makes it more difficult for shredded files to be put back together.
Sarah mentions cases in which shredded files have been reassembled and trash has been stolen
to obtain information from non-shredded documents.
Identity Theft
Identity theft involves wrongfully obtaining and using another person’s personal data in a way
that involves fraud or deception, typically for financial gain. Personal data includes name, date of
birth, address, credit card numbers, social insurance number, other identification and financial
information.

As an adviser, what is my responsibility in preventing and protecting against identity theft?

The Identity Theft Process

Identity theft is a two-step process:
1. Unauthorized collection of personal information, which could be used immediately, stored
for later use or sold (trafficked) for use by someone else (identity theft).
2. Deceptive use of that personal information, typically for financial gain, often at the expense
of the individual to whom the information belongs (identity fraud).
Example
Sarah’s client, Liz, has banked with Sarah’s financial institution for many years. Recently, Liz
received an email marked URGENT, which contained the subject line: Your bank needs to
update its records. Liz opened the email. Because her bank’s logo appeared at the top of the
email, she provided the requested information: her current address, social insurance number,
telephone number, bank account numbers, personal information numbers (PINs) and the
approximate current balance in each account.
Four days later, Liz met Sarah at the branch and mentioned this request for information.
Sarah knew something was not right because the bank never asks clients for personal
information by email.
Liz was the victim of identity theft. In the first step of the process, an ill-intentioned person
collected highly confidential personal and financial information about Liz that she would not
have ordinarily provided to anyone except trusted family members or bank staff.
In the second step of the process, Liz’s personal information could be used by the recipient for
fraudulent purposes, such as attempting to make unauthorized withdrawals from her accounts.
Her personal information could also be sold to a third party who could use the information to
create a false identity for criminal purposes.
Impact on Victims
IDENTITY THEFT HURTS EVERYONE
Victims who are not at fault are normally protected from direct liability. Even if victims suffer no
direct financial loss, nothing can protect a person from the feeling of violation and victimization.
Resolving problems related to the identity theft requires serious effort and can take years. During
that time, the victim may be unable to use his existing credit cards and may be harassed by
collection agents or denied new credit or loans. The victim is also vulnerable to being the target
of a criminal investigation, a civil suit or an arrest.
Having been the victim of identity theft once is no
Resolving problems related to the
guarantee that identity theft will not happen again.
In fact, having been the victim of identity theft may theft requires serious effort and
increase the chances of being targeted a second time. can take years.

INACTION IS A MISTAKE
If you know or suspect a theft of confidential or personal information has occurred, one of the
worst mistakes is inaction. Avoid being hopeful that nothing will come of it. Report immediately
any real or possible breach to the appropriate level of management. If your client is not already
aware of the situation, notify her promptly.
WHAT VICTIMS CAN DO

The Privacy Commissioner of Canada suggests the following actions for individual victims of
identity theft:
• Report the crime to the police immediately. Ask for a copy of the police report so that you
can provide proof of the theft to the organizations you will need to contact.
• Take steps to undo the damage (e.g., close current bank accounts and open new accounts;
ensure your credit report includes details of the theft).
• Document the steps you take and the expenses you incur to clear your name and
re-establish your credit.
• Advise your telephone, cable and utilities providers that someone using you name could try
to open new accounts fraudulently.
IMPACT ON FINANCIAL INSTITUTIONS

Financial institutions and other businesses may absorb significant costs in responding to individual
cases of identity theft and in building or correcting processes or systems to prevent future
identity thefts. Such costs may be passed on to consumers. The financial institution may also
suffer harm to its reputation.
Example
After Sarah spoke with Liz, she immediately rushed to check the status of Liz’s operating bank
account. She found that a $2,000 withdrawal had been made two days earlier. The information
Liz had provided in her email response was used to make that withdrawal.
When Liz heard the news, she was upset. However, Sarah assured Liz that the bank would
cover the loss because the withdrawal was a result of identity theft and fraud.
Liz was relieved to hear of the compensation but she was embarrassed by her gullibility in
providing personal financial information in an email. She also was worried about what else the
fraudsters could do with her information.
Clearly, both Liz and the bank were victims of identity theft and fraud.

How to Detect and Prevent Identity Theft

SPOTTING IDENTITY THEFT CAN BE DIFFICULT
Identity theft is a complex problem. No simple or single solution can prevent identity theft.
Financial institutions must apply safeguards in the collection and protection of personal
and confidential information. Your responsibility as an adviser is to follow your institution’s
policies and procedures for identity verification and customer authentication. You also need to
understand your part in safeguarding your clients’ personal information.
INDIVIDUAL SECURITY MEASURES

Individual security measures are key to preventing identity theft. Encourage your clients to
practise the following preventive measures:
• Disclose personal information only when you
are confident the recipient has appropriate Your responsibility as an adviser
safeguards in place. is to follow your institution’s
policies and procedures for
• Do not supply personal information over the
phone, by mail or through the Internet unless identity verification and
you have initiated the contact or you know the customer authentication. You
person you are dealing with. also need to understand your
• In the event of lost identification, inform the part in safeguarding your clients’
supplier. In more serious cases, inform credit- personal information.
reporting agencies, such as Equifax.
• Do not disclose or share your passwords and PINs. Do not write them down or carry them
with you. Choose passwords that cannot be easily guessed. Change your passwords and
PINs regularly. Shield your PIN when using an automated teller machine (ATM) or when
entering a PIN to complete a debit or credit card transaction.
• Carry only the identification and other personal information that you need. Keep your SIN
card, birth certificate and passport in a safe place.
• Shred documents that contain sensitive personal and financial data, such as account
statements.
• Guard the security of your mail. Be alert for regularly received mail (e.g., a monthly account
statement) that does not arrive.
• Regularly check your account statements to ensure all transactions were authorized.
• Take advantage of technologies that enhance security and privacy on the Internet, such as
firewalls, digital signatures and encryption.
• Avoid using Internet cafés or public library terminals for transactions that require disclosure
of personal information.

Example
Liz uses a single credit card with a low credit limit for online purchases. She checks her
statement each month to monitor the transactions. Liz has arranged with the card issuer to
stop any transaction that is more than a set dollar amount.
Putting It to Work!
HOW CAN YOU MINIMIZE THE RISK OF IDENTITY THEFT FOR YOUR CLIENTS ?
Take every opportunity to educate your clients about identity theft. Teach your clients how
to protect their identities when making transactions that require the sharing of personal
information.
For example, your client’s local shop owner does not need to write the client’s phone number on
a credit card slip “for later verification.” If the store does not do business by phone, it has no need
to collect the client’s phone number. Clients should not leave their credit card information in a
voice-mail.
Like you, your clients’ first instincts are probably to be trusting of others. However, remind your
clients to be diligent and to show caution when sharing personal information.
Example
Video stores and other rental businesses typically ask for credit card information to enter a
charge if the item is returned late or not returned at all.
Sarah tells her clients to question this so-called standard requirement. She tells her clients to
ask why the information is required, how the information will be stored and kept secure and
how the information will be disposed of when the rented item is returned.
Other Types of Fraud

Understanding the types of frauds and scams that have been used against financial institutions in
the past will help you to understand modern scams and cybercrime.

How can I recognize other types of fraud to protect my clients, my financial institution
and myself?

Examples of Other Types of Fraud

The following scams have been around for years:
• Forged documents (often referred to as “bad” cheques)
• Client impersonation and unauthorized withdrawals
• “Pump and dump” schemes
• Advance fee schemes
A newer category of crime is the technology-enabled fraud.
Let’s take a close look at each of these types of fraud. As an adviser, you need to know how to
identify these frauds for your own benefit and so that you can educate your clients.
Forged Documents
In all forged document cases, the victim (i.e., the financial institution) is financially responsible for
the transaction. Millions of dollars are lost in such transactions annually. You need to understand
how cheques can be misused so that you can identify suspicious cheques.
Let’s take a closer look at the misuse of cheques.
A bad cheque is a cheque that is supposedly negotiable but is not negotiable. The cheque
“bounces” or is returned “NSF” (non-sufficient funds). In the case of fraud, the payer knows that
he does not have the money to cover the cheque and he has no intention of covering the cheque.
He relies on the time it takes for funds to transfer and cheque deposits to clear. He will likely
be long gone with the money or goods received from the bad cheque by the time the holder
discovers the fraud.
Kited cheques are used by fraudsters to extend the amount of time it takes for the fraud to
be discovered. Cheques issued from an account with no funds at one financial institution are
combined with deposits at another financial institution in a circular process. By the time the
institutions realize they have accepted NSF cheques, the fraudster is gone with the money.
Stolen altered cheques are created when authentic cheques are intercepted in the mail and
the amount or the payee, or both, are altered. The fraudster may insert her name in place of
the original payee, forge the signature and cash the cheque. Altered cheques can also be used
as a form of payment and traded on in more involved scams (e.g., from a petty criminal to an
organized fraud ring).
A blended cheque may combine a valid institution identifier with a fake account number for
one financial institution and the logo and address of another financial institution. The fraudster
deposits the cheque and withdraws the funds long before the cheque clears.
Forged certified cheques can also be used by fraudsters who depend on the fact that because
a certified cheque has the reputation of being more trustworthy, it will be the subject of less
scrutiny! This also applies for cheques drawn on large companies or Government agencies. Even if
you recognize the name of the company or the cheque looks familair, make sure you still carefully
examine it.

Example
Sarah spots a cheque that shows an institution code beginning with “99.” Because Sarah is
more accustomed to institution codes that begin with “0,” she investigates the validity of
this code.
On another occasion, she spots a cheque printed with the logo of a credit union that is located
in the region she spent her childhood summer vacations. Her suspicions are raised when the
address information lists a town that she knows is not in the region the credit union serves.
Client Impersonation and Unauthorized Withdrawals

HOW DO CLIENT IMPERSONATION AND UNAUTHORIZED WITHDRAWAL
SCHEMES WORK ?
Client impersonation followed by an unauthorized withdrawal has always been a popular
financial services scam. This scheme involves pretending to be someone else and asking for that
person’s money.
Today, a request for a large amount of cash would be a red flag to most people working in a
financial institution. Fraudsters attempt to avoid this suspicion by requesting fund transfers to
different, seemingly legitimate accounts.
As an adviser, you must be cautious about releasing funds. Do so only after you have followed
appropriate procedures to confirm that the person completing the transaction is the correct
client and is authorized to make the withdrawal.
Example
Maggie is 77 years old. She has been Sarah’s client for five years. Maggie’s handbag is stolen
at the supermarket. Her handbag contained some documents with Maggie’s personal and
financial information and $200 in cash.
Later that day, Sarah receives an urgent call from Maggie’s daughter, who informs Sarah of the
theft of the handbag. Sarah immediately checks Maggie’s account. It’s too late.
Just after the handbag was stolen, a well-dressed elderly woman enters another branch of
Maggie’s bank and asked to withdraw $4,000 in cash. The woman happily mentioned that the
cash was a wedding gift for her grandson. When the CSR asked to see personal identification,
the woman provided identification from Maggie’s stolen purse.
The elderly woman cleverly impersonated Maggie at the bank and had the information and
identification to back up her impersonation. She (and any accomplices) worked quickly after
stealing the handbag. The CSR could not tell that the impersonator was not the real Maggie.
The CSR had checked the age and gender profile that displayed on her computer, which
matched the elderly woman who requested the unauthorized withdrawal.

“Pump and Dump” Schemes

HOW DOES THE “PUMP AND DUMP” SCHEME WORK?
“Pump and dump” schemes have two steps. In the first step, (the “pump”), fraudsters acquire
stocks in a little known company at a low price and then hype or “tout” the security to persuade
other people to also buy into the company. More people buy the stock, raising, or “pumping”
the price.
The second step (the “dump”) occurs after many people have purchased the stock, raising its
price. The fraudsters then sell the stock at the inflated price and disappear with the sale proceeds
(the “dump”). The value of the investment plunges for the remaining investors when the market
realizes the real worth of the security.
Historically, pumping was time-consuming and laborious because it relied on telephone calls,
mailed newsletters and rumour. Today, the Internet and email make it easier and cheaper
to distribute a “hot tip” or to send unsolicited mass emails (i.e., spam) to millions of people.
The occurrence of financially based spam is increasing.
Educate your clients to be wary of unsolicited emails from strangers who offer “hot tips” and
investment advice. Your clients should also avoid responding to postings on investment-oriented
bulletin boards and chat rooms.
Example
Your client tells you that she has information that rising oil prices have led to the development
of new oil-rich fields. She has been told of promising returns if she buy shares in a particular
petroleum extractor.
Your client needs more information about the oil sector in general and about the petroleum
extractor in particular. This information will help her decide whether this information is the
hype of a “pump and dump” scheme or whether the tip is legitimate.
Advance Fee Schemes

Advance fee schemes have various names. These schemes are also known as West African letter
scams or Nigerian letter scams; however, these scams can originate from anywhere.
HOW DOES THE ADVANCE FEE SCHEME WORK?

The fraudster sends an email (in the past, a letter or fax) claiming that a large amount of money
is locked or frozen in a bank account, sometimes as the result of a change in government. The
fraudster asks for the email recipient’s assistance, in return for a promised fee. The recipient
of the email is asked “in good faith” to either deposit a sum of money in a bank account or send
money by a wire payment. The fraudster will also ask the sender to provide bank account details
so the promised fee can be deposited. The fraudster then uses the provided information to drain
the bank account using other fraudulent techniques.
In the past, the scam typically involved an unsolicited letter or fax from someone claiming to be a
high-ranking official from a developing country.

The modern version often involves providing a cheque to the victim with a request that the
victim deposit the cheque (but keep a portion as a reward) and refund the balance to the
requestor by way of a separate cheque. By the time the victim learns that the deposited cheque
has been returned NSF, the fraudster has cashed the victim’s cheque and disappeared.
Example
Sarah’s client, an independent technical writer, reported receiving an email requesting her
services. After the client agreed to do the work, the requestor sent her money by FedEx next-
day delivery. The address was from a company in the United States, but the phone number was
from the United Kingdom. The envelope contained money orders for twice the amount of the
agreed-upon price. The requestor contacted Sarah’s client by email, apologizing for sending
more than the price agreed on and requested that the writer subtract her fees and wire the rest
back by Western Union.
Does this scheme seem suspicious to you?
Technology-Enabled Frauds
The most serious types of technology-enabled frauds that you may face as an adviser include
the following:
• Internet fraud
• Phishing (and its variant, vishing)
Let’s take a closer look at these two types of technology-enabled frauds.
Internet Fraud
The Internet provides financial services professionals and their clients with access to a wealth
of financial information. Unfortunately, the Internet also provides fraudsters with equal
opportunities to spread false information and to conceal their true identities.
Entire websites have been built to give illegal activities the appearance of legitimacy or to trick
users into supplying personal information.
The international reach of the Internet means that a criminal residing in one country can carry
out illicit activities on the other side of the globe.
Chat rooms, personal weblogs (blogs) and social networking sites encourage users to reveal
information that should never be posted. As an adviser, you must be aware of your responsibility
at all times to be discreet and to safeguard confidential information.
Example
Sarah visits a friend’s social networking page that shows recent pictures of her wedding, which
Sarah attended. Upon finding some photographs that include her, Sarah contacts her friend
and asks that those photographs be removed to protect Sarah’s privacy.

Sarah does not use social networking programs herself because she knows that even if she were
to use profiling, she cannot control who is learning about her personal details in the network
of her friends’ friends. The distribution of information about her can quickly spiral beyond her
control and threaten her privacy. She could even be set up as a target if she is identified as an
employee of a financial institution.
Phishing and Vishing

HOW DOES PHISHING WORK?
Phishing is designed to trick people into voluntarily disclosing confidential information to a source
they believe is trusted or authorized.
The fraudster sends official-looking emails that appear to come from a well-known legitimate
company. The criminal’s hope is that some recipients will be existing customers of the company
being impersonated and will be tricked into providing or confirming personal or confidential
information. Often, the tricked user clicks on a link to a false, but legitimate-looking website
where the user is asked to supply personal information. Once the personal information is
captured, the fraudster commits fraud or identity theft.
Spyware (which tracks Internet use and can harvest personal information) is often embedded
in phishing messages. The spyware application loads on to your computer when the message
is opened.
HOW DOES VISHING WORK?

Vishing (or voice phishing) is the telephone counterpart to phishing. Instead of directing the
email recipient to a website, the victim is asked to phone a toll-free number. An automated voice
system then requests the information. The phone is used because many people are more likely to
trust a request received by phone than to trust an email request.
As an adviser, you should be aware of these schemes. Educate your clients so they are not tricked
into dangerously sharing personal information.
Example
Sarah opens her email at home and shakes her head. Her inbox contains a message from a bank
asking her to confirm her account information to help the IT group resolve a security breach.
Sarah shakes her head because she is not a client of the bank identified as the sender. Even
if the message had appeared to come from her own financial institution, she knows that
legitimate financial institutions do not request such information by email. Sarah immediately
recognizes this message as phishing.

Putting It to Work!
HOW WILL YOU USE THIS INFORMATION ABOUT TYPES OF FRAUD, INCLUDING
TECHNOLOGY- ENABLED FRAUD ?
Being aware of different types of fraud and understanding how they work will help you to become
more sensitive to unusual business activities. This knowledge will also make you more likely to
spot emerging patterns that can prevent or reveal fraud or other crimes, such as forgery. Develop
an awareness of different types of fraud as part of your “product knowledge.” Your awareness and
knowledge of fraud will enhance the professionalism and diligence you display in serving your
clients. Prevention is the best protection for all involved.
Use the following checklist to monitor and develop your own knowledge level in the area of fraud
and fraud prevention. When you learn of new financial wrongdoings, research how the crime was
perpetrated and the actions that could have prevented the crime.
CHECKLIST: LEARNING MORE ABOUT FRAUD AND HOW TO PREVENT IT

Instructions:
• At the end of each month, assess your competence and comfort level with explaining and
detecting various financial crimes and types of fraud.
• When you check “yes” for items, decide whether they need to stay on the list for the
following month. Throughout the next month, add new items to the list as you encounter
scenarios or transactions that are challenging or unfamiliar.
• Modify the checklist on the basis of performance standards set by your financial institution
and your own perception of your professional development needs.

Items Place a mental

check ( ) in one of the
columns below
This month I focused on: Yes No
• Learning and identifying the formats of the various numeric
codes on Canadian and American cheques
• Discussing with my mentor and colleagues examples of “bad”
cheques they’ve encountered
• Reviewing the barriers my financial institution has in place
against forged documents
• Researching advance fee schemes to learn of the most
recent variants
• Exploring the investment advice tools available to my clients
on my financial institution’s website
Next month, my goal is to focus on:
• Reading posts to a reputable investment chat room
• Familiarizing myself with electronic payment options, such as
PayPal and email fund transfers, and how security is set up
for these services

Ethical Decisions
Section 6 – Regulatory Regimes and Their Role With

You and Your Client
SECTION SIX – REGULATORY REGIMES AND THEIR ROLE WITH YOU AND YOUR CLIENT
The Regulatory Regime for Canadian Financial

Institutions
The various Canadian regulatory bodies both protect investors and play a key role in
fostering market integrity.
Regulatory bodies have the authority to penalize and Regulatory bodies protect
prosecute individuals and financial institutions that investors and foster market
have committed a wrongdoing. Such wrongdoings can
include not adhering to the industry’s high professional
integrity.
standards.
The following organizations comprise the regulatory regime that affects you as an adviser:
• Office of the Superintendent of Financial Institutions (OSFI)
• Canada Deposit Insurance Corporation (CDIC)
• Canadian Bankers Association (CBA)
• Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
• Financial Consumer Agency of Canada (FCAC)
• Office of the Privacy Commissioner of Canada (OPC)
Let’s look at each of these organizations in greater detail.

What role do the organizations in my financial institution’s regulatory regime play in my
dealings with my clients?
Office of the Superintendent of Financial

Institutions (OSFI)
WHAT IS THE OSFI ?
The Office of the Superintendent of Financial Institutions (OSFI) was established in 1987 to act as
a simple regulatory body for all federally regulated financial institutions. These institutions include
deposit-taking institutions, such as banks, trust and loan companies; credit unions; insurance
companies; and foreign bank representative offices that are chartered, licensed or registered by
the federal government. OSFI also supervises more than 1,200 federally regulated pension plans.
OSFI does not regulate the Canadian securities industry.
OSFI also provides actuarial advice to the Government OSFI, the Office of the
of Canada and conducts reviews of some provincially
Superintendent of Financial
chartered financial institutions.
Institutions, is a federal
regulator.

RELATING THE OSFI TO YOUR WORK

The OSFI website (www.osfi-bsif.gc.ca) includes a section titled Warning Notices, which is
intended for the general public. You and your clients can access this website to stay informed
about scams, frauds and the names of entities suspected to be of concern to businesses and
the public.
Example
Sarah’s new client, Manuel, is concerned about the general state of the Canadian and American
economies, especially the condition of many financial institutions in the United States. He has
heard that the Canadian financial system is more stable and thus better able to withstand the
shocks resulting from the US debacle in 2008–09. Manuel needs some reassurance from Sarah.
Sarah tells Manuel that OSFI, the Office of the Superintendent of Financial Institutions, is
a federal regulatory body that has done a great job in keeping the Canadian financial system
strong, well-capitalized and relatively conservative in its lending practices. OSFI determines
whether financial institutions are in sound financial condition and whether they meet
minimum funding requirements. It promptly advises institutions of problems and, more
importantly, ensures that management takes corrective action quickly. Sarah tells Manuel that
thanks to OSFI and other financial regulatory organizations, the Canadian banking system
is considered among the best in the world and has done relatively well in the meltdown
of 2008–09.
Canada Deposit Insurance Corporation (CDIC)

WHAT IS THE CDIC ?
The Canada Deposit Insurance Corporation (CDIC)
is a federal crown corporation created in 1967. CDIC The CDIC is a federal crown
contributes to the stability of Canada’s financial system
by insuring deposits. CDIC automatically insures corporation that insures deposits
eligible deposits up to $100,000 per depositor in to help stabilize the Canadian
each member institution (banks, trust companies and financial system.
loan companies). If a member institution fails, CDIC
reimburses depositors for the amount of any insured
deposits.
CDIC’s deposit insurance does not protect against fraud, theft or scams.
RELATING CDIC TO YOUR WORK

Educating your clients about CDIC and what it does and does not protect can add to their
confidence and feelings of security. For clients with less financial knowledge, you may need to
explain the different levels of protection on deposits such as bank accounts and GICs in contrast
to mutual fund holdings.
You can find more details on the eligibility of various deposits on the CDIC website
(www.cdic.ca).

Example
Sarah is talking to Arjun who recently won $200,000 in a lottery. Arjun wants to deposit the
entire sum in an online bank because its savings account currently pays the highest rate of
interest. Sarah explains to Arjun that he may be taking an undue risk. Although the online
bank is a member of CDIC, CDIC will only insure up to $100,000. If the online bank goes
out of business, Arjun could potentially lose half his lottery winnings. Sarah suggests that
Arjun deposit $100,000 in the online bank and the other $100,000 with Sarah’s bank. That
way, the entire amount will be protected under CDIC.
Canadian Bankers Association (CBA)

WHAT IS THE CBA ?
The Canadian Bankers Association (CBA) is a
professional industry association that provides its CBA is a professional association
members (the chartered banks of Canada) with
for the Canadian banking
information, research and operational support. The
CBA also contributes to the development of public industry.
policy on financial services.
The CBA also provides consumer and research information to help individuals and small business
owners understand and manage their financial affairs.
RELATING THE CBA TO YOUR WORK

You can use the information provided by the CBA to educate your clients on important
topics such as fraud and the security of their financial information, tax competitiveness and
business continuity.
You can find more information on the CBA at its website (www.cba.ca).
Example
Sarah’s client, Tariq, is a young entrepreneur who owns and operates a small bakery. Tariq has
been Sarah’s client for a year. He is having difficulty with some aspects of the business and
approaches Sarah for guidance. Sarah has not dealt much with small business owners; however,
she needs to help Tariq. On the website of the Canadian Bankers Association, she finds
resources and tools that could be helpful for Tariq. Within one day, Sarah is able to provide
Tariq with relevant information and suggestions. Tariq is impressed and thanks Sarah for
getting back to him so quickly.

Financial Transactions and Reports Analysis Centre of

Canada (FINTRAC)
WHAT IS THE FINTRAC ?
The Financial Transactions and Reports Analysis
Centre of Canada, or FINTRAC, is a Canadian federal FINTRAC assists in the
agency that assists in the detection, prevention and detection, prevention and
deterrence of both money laundering and the financing deterrence of both money
of terrorist activities in Canada and abroad.
laundering and the financing of
FINTRAC analyzes and assesses reports received from terrorist activities in Canada.
financial institutions and intermediaries. As permitted
by legislation, FINTRAC discloses to law enforcement
and intelligence agencies (including the Canadian Security Intelligence Service, or CSIS) any
suspicions of money laundering or of terrorist financing activities.
The record keeping and client identification requirements that support FINTRAC’s work are
addressed in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
RELATING THE FINTRAC TO YOUR WORK

Your financial institution is required to report to FINTRAC and to comply with the provisions of
the PCMLTFA. These obligations explain, in part, why you must keep certain records and require
specific information from and about your clients.
You can learn more about FINTRAC and anti–money laundering and anti–terrorist financing
efforts at the FINTRAC website (www.fintrac.gc.ca).
Example
A middle-aged man walks into Sarah’s office carrying a briefcase. He is dressed expensively but
conservatively. After exchanging pleasantries, he tells Sarah he wants to open an account. He
opens his briefcase and takes out $100,000 in bills, large and small.
Following her institution’s anti–money laundering rules, Sarah starts to complete a report
capturing the man’s personal details. She also needs to identify the source of the cash. The
man becomes upset by Sarah’s questions. He tells Sarah that he does not have to answer. Sarah
knows that she must complete the form for any cash transaction greater than $10,000, which
must be reported to FINTRAC. Sarah tells the man that unless she can complete the form, she
will be unable to open the account.

Financial Consumer Agency of Canada (FCAC)

WHAT IS THE FCAC ?
The Financial Consumer Agency of Canada (FCAC)
is a federal regulatory agency. FCAC works to
FCAC works to protect and
protect and inform consumers of financial services, inform financial services
to strengthen oversight of consumer issues and to consumers.
expand consumer education in the financial sector.
FCAC’s responsibilities include the following:
• Ensuring that federally regulated financial institutions comply with federal consumer
protection laws and regulations
• Monitoring financial institutions’ compliance with voluntary codes of conduct and their own
public commitments
• Informing consumers about their rights and responsibilities when dealing with financial
institutions
• Providing timely and objective information and tools to help consumers understand, and
shop for, a variety of financial products and services
RELATING THE FCAC TO YOUR WORK

As an adviser, you can benefit from learning more about the obligations of your financial
institution to the various acts and regulations overseen by FCAC. You can also learn about
financial institutions’ voluntary codes of conduct and their public commitments.
FCAC offers information and a variety of tools on how mortgages and credit cards work and the
cost of banking. Your clients may find this information helpful.
You can learn more at the FCAC website (www.fcac.gc.ca).
Example
Sarah’s client, Manuel, is planning to purchase a house and needs a mortgage. He asks
Sarah several questions about the mortgage options her financial institution offers. Because
he is cautious, he asks Sarah to recommend an impartial, neutral source of information
on mortgages. Manuel especially wants to know more about his rights and responsibilities
regarding mortgages.
Sarah directs him to the FCAC website. It has an entire section on mortgages, including an
individual’s rights and responsibilities when dealing with a financial institution.

Office of the Privacy Commissioner of Canada (OPC)

WHAT IS THE OPC ?
The Office of the Privacy Commissioner of Canada
(OPC) reports directly to the House of Commons OPC protects and promotes the
and the Senate. The OPC’s mission is to protect and privacy rights of individuals.
promote the privacy rights of individuals.
Part of the OPC’s mandate is to oversee compliance with the Personal Information Protection and
Electronic Documents Act (PIPEDA), Canada’s private-sector privacy law. The OPC investigates
complaints under PIPEDA, except in Quebec, British Columbia and Alberta, which have adopted
similar provincial privacy legislation.
PIPEDA is a federal regulatory standard that governs the collection, use and disclosure of
personal information by businesses (including financial institutions). PIPEDA applies to personal
information collected, used or disclosed by all federally regulated bodies (such as financial
institutions), including personal information about their employees. PIPEDA also applies to
all personal data that flows across provincial or national borders in commercial transactions
involving organizations subject to PIPEDA or similar legislation.
RELATING THE OPC TO YOUR WORK

The OPC makes a wide variety of information available on its website (www.privcom.gc.ca).
You and your clients can use this information to learn more about privacy breaches and other
key privacy issues, including fraud. The website also provides resources that may be extremely
valuable for your clients who are small business owners.
Example
During a meeting with Sarah, Liz proudly tells the story of signing up for membership at a new
gym. Liz recounts that she saw the social insurance number (SIN) field on the form, but left
it blank. She explained to the gym manager that the SIN should not be used for identification
and that using the SIN when it wasn’t truly necessary increased the risks of privacy breaches
and identity theft. She suggested to the manager that she discuss with her supervisors removing
the field from the form and instructing gym staff to not collect this number.
Sarah congratulated Liz on her consumer awareness and her taking charge of protecting herself.
Sarah explained further that unless an organization can demonstrate that your SIN is required
by law or that no alternative identifier would suffice to complete the transaction, you cannot be
denied a product or service on the grounds of your refusal to provide your SIN.

Putting It to Work!
HOW CAN MY CLIENT AND I BENEFIT FROM THE REGULATORY REGIME IN WHICH
MY FINANCIAL INSTITUTION OPERATES ?
Although rules and regulations can sometimes seem to get in the way of business and client
service, their real purpose is to protect you, your client and your financial institution. The
regulatory regime is part of the structure that maintains professional standards and builds your
clients’ confidence in you. You have also learned in this section that the various organizations
that affect how you do business offer valuable information, research and guidance for you and
your clients.
Use those resources to build your professional knowledge and to educate your clients:
• Learn more about risk in the financial services, including how to detect and avoid the risks
of fraud and other financial crimes.
• Learn more about the protection of privacy and personal information, including financial
information and the consequences of privacy breaches.
• Use resources made available by these organizations to answer your clients’ questions and
to help them in other business transactions.
• Share the resources of these organizations that are aimed at youth to improve the financial
and privacy literacy of your next generation of clients!
Example
Larry, a seasoned adviser, has found that the names of several regulatory organizations
frequently come up in his interactions with clients. Larry has set up a file folder containing
useful web links and resources regarding these regulatory organizations so that he can easily
locate this information when answering client questions.
Most clients are eager to know about CDIC protection. In these turbulent times, clients
want assurance that the money they invest even in guaranteed products is further protected
by CDIC.
In addition to the CDIC’s website, Larry also directs many clients to the FCAC website or, if
time permits, he opens the website on his office computer and shows the clients on screen the
website’s various resources to help financial consumers with information about their rights and
responsibilities.
Larry has found that by having this information just a mouse click away, he raises his
credibility with clients.

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Module 4 – Managing Risk by Making

Section 1 – Ethics in the Financial Services Industry

Guiding Values of the Financial Services Industry

Reﬂective question – While you study this topic, ask yourself:

Protecting Your Clients’ Interests

© CANADIAN SECURITIES INSTITUTE (2016) 3

Honesty, Integrity and Fairness

4 © CANADIAN SECURITIES INSTITUTE (2016)

AN ADVISER’S PERSONAL BUSINESS

© CANADIAN SECURITIES INSTITUTE (2016) 5

6 © CANADIAN SECURITIES INSTITUTE (2016)

PERSONAL CLIENT INFORMATION

USE OF CONFIDENTIAL CLIENT INFORMATION

© CANADIAN SECURITIES INSTITUTE (2016) 7

8 © CANADIAN SECURITIES INSTITUTE (2016)

Let’s see how Scott did in following the guiding values:

The Guiding Values Yes No

© CANADIAN SECURITIES INSTITUTE (2016) 9

Section 2 – The Importance of Ethics to an Organization

Reﬂective question – While you study this topic, ask yourself:

The Goal of Ethical Behaviour

© CANADIAN SECURITIES INSTITUTE (2016) 3

Trust as a Direct Result of Ethical Behaviour

Reﬂective question – While you study this topic, ask yourself:

Ethical Factors Required to Build Trust

4 © CANADIAN SECURITIES INSTITUTE (2016)

Setting the Stage to Create Trust

Reﬂective question – While you study this topic, ask yourself:

© CANADIAN SECURITIES INSTITUTE (2016) 5

6 © CANADIAN SECURITIES INSTITUTE (2016)

© CANADIAN SECURITIES INSTITUTE (2016) 7

Section 3 – Ethical Dilemmas When Working

When Our Values Clash

Reﬂective question – While you study this topic, ask yourself:

Right Versus Wrong Issues

Right Versus Right Dilemmas

© CANADIAN SECURITIES INSTITUTE (2016) 3

4 © CANADIAN SECURITIES INSTITUTE (2016)

Types of Ethical Dilemmas

Reﬂective question – While you study this topic, ask yourself:

© CANADIAN SECURITIES INSTITUTE (2016) 5

Identifying the Core Values in Conﬂict

6 © CANADIAN SECURITIES INSTITUTE (2016)

© CANADIAN SECURITIES INSTITUTE (2016) 7

Section 4 – Using “Know Your Client” to Manage Risks

The Importance of the Know Your Client (KYC) Rule

Guarding Against Fraud

Reﬂective question – While you study this topic, ask yourself:

Beyond the KYC Rule

Reﬂective question – While you study this topic, ask yourself:

© CANADIAN SECURITIES INSTITUTE (2016) 3

Asking Your Client the Right Questions

MEETING FACE TO FACE

4 © CANADIAN SECURITIES INSTITUTE (2016)

Balancing Service With Due Diligence

© CANADIAN SECURITIES INSTITUTE (2016) 5

EXAMPLES OF DUE DILIGENCE

DO NOT BE LED ASTRAY

6 © CANADIAN SECURITIES INSTITUTE (2016)

© CANADIAN SECURITIES INSTITUTE (2016) 7

Section 5 – Recognize Unusual Business Activities

Red Flags and Suspicious Behaviour