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Capital FailureRebuilding Trust in Financial Services$
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Nicholas Morris and David Vines

Print publication date: 2014

Print ISBN-13: 9780198712220

Published to Oxford Scholarship Online: October 2014

DOI: 10.1093/acprof:oso/9780198712220.001.0001

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Professional Obligation, Ethical Awareness, and Capital Market Regulation

Professional Obligation, Ethical Awareness, and Capital Market Regulation

(p.209) 10 Professional Obligation, Ethical Awareness, and Capital Market Regulation
Capital Failure

Justin O’Brien

Oxford University Press

This chapter argues that it is essential to challenge the norms governing the financial industry, to place ethical judgement above legal permissibility and technical compliance. It explores the ethical and normative foundation of the current market conduct and disclosure regime, as established at the time of the New Deal in America. However there has been progressive erosion of that compact, with powerful lobbying by the industry aimed at preventing such a compact being re-established. The gatekeepers of market integrity, the legal and audit communities, have contributed to the decline in ethical behaviour through their elevation of technicalities above substantive ethical considerations. Two Australian examples of malpractice demonstrate the need for change in professional behaviour: marketing of complex financial products and the pronounced deterioration in the quality of audit work. Extending responsibility and accountability requires regulation to integrate normative objectives and to move beyond a deceptive concern for efficiency.

Keywords:   ethical judgement, legal permissibility, market conduct, disclosure regime, normative objectives, market integrity, ethical behaviour, capital market regulation

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