Conflicts of interest arising from the prudent investor rule: Ethical implications for over-the-counter derivative securities [Book Review]

Journal of Business Ethics 47 (2):165 - 173 (2003)
  Copy   BIBTEX

Abstract

The Prudent Investor Rule creates a potential ethical dilemma for investment advisors selling over-the-counter financial products issued by their firms. The "opportunity" to defraud investors using complex, over-the-counter derivative securities designed for client-specific risk management is much higher than for exchange traded securities. This paper emphasizes the ethical responsibility held by trustees and their organizations to eliminate potential conflict of interests through internal control and monitoring. Independent evaluations of the performance of investment advisors and independent appraisals of complex over-the-counter securities are important in reducing the risks of conflicts of interest. Recent lessons learned from the corporate ethics crisis and requirements of the 2002 Sarbanes Oxley Act would suggest that conflict of interest must be eliminated with third party validation of derivative pricing. By performing due diligence and validation, the trustee is able to satisfy the requirements under the Prudent Investor Rule.

Links

PhilArchive



    Upload a copy of this work     Papers currently archived: 94,517

External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

Similar books and articles

Investor-Paid Ratings and Conflicts of Interest.Leo Tang, Marietta Peytcheva & Pei Li - 2020 - Journal of Business Ethics 163 (2):365-378.
Ethical conflicts in finance.Andreas R. Prindl & Bimal Prodham (eds.) - 1994 - Cambridge: Blackwell Finance.
Ethical Behaviour and Securities Trading.Jan H. W. Goslings - 1997 - Business Ethics, the Environment and Responsibility 6 (3):147-152.
An Examination of Corporate and Regulatory Responses to Socially Oriented Investor Activism.Michael Hadani, Jonathan Doh & Marguerite Schneider - 2013 - Proceedings of the International Association for Business and Society 24:178-187.
An Examination of Corporate and Regulatory Responses to Socially Oriented Investor Activism.Michael Hadani, Jonathan Doh & Marguerite Schneider - 2013 - Proceedings of the International Association for Business and Society 24:178-187.
ESG in Focus: The Australian Evidence.Jeremy Galbreath - 2013 - Journal of Business Ethics 118 (3):529-541.

Analytics

Added to PP
2009-01-28

Downloads
55 (#287,030)

6 months
7 (#622,206)

Historical graph of downloads
How can I increase my downloads?

Citations of this work

No citations found.

Add more citations

References found in this work

Ethical issues in financial activities.Jean-Michel Bonvin & Paul H. Dembinski - 2002 - Journal of Business Ethics 37 (2):187 - 192.

Add more references