Title: Grey matters ethical dilemma: Nothing to be proud of StandFirst: Amidst worries that he may not be accepted in his new workplace because of his sexuality, Will has to make a decision regarding what to do about suspicions that his CEO has discriminated against clients in a same sex relationship PublicBody: Will is a recent graduate who has just started work at a small wealth management firm. Will is gay and lives with his boyfriend. They are both out to their family and friends. When Will started at the firm, however, he was intimidated about starting a new job and meeting new people, so hasn't officially come out at work yet – preferring to talk about his 'partner' rather than his boyfriend, and not correcting people when they assume his partner is female. The CEO, Seth, is the biggest culprit of making this assumption. Will has overheard Seth make comments about LGBTQ+ people which he appeared to think were funny, but in fact bordered on derogatory and rude, if not actually offensive. As a result, Will feels even more intimidated about coming out at work. This is very stressful for him as he has no desire to go 'back in the closet'; he simply wants to feel comfortable around his new colleagues before divulging personal information. Now, however, he worries that he may never be able to be his true self at work, which he finds upsetting and demotivating. PrivateBody: Will is a recent graduate who has just started work at a small wealth management firm. Will is gay and lives with his boyfriend. They are both out to their family and friends. When Will started at the firm, however, he was intimidated about starting a new job and meeting new people, so hasn't officially come out at work yet – preferring to talk about his 'partner' rather than his boyfriend, and not correcting people when they assume his partner is female. The CEO, Seth, is the biggest culprit of making this assumption. Will has overheard Seth make comments about LGBTQ+ people which he appeared to think were funny, but in fact bordered on derogatory and rude, if not actually offensive. As a result, Will feels even more intimidated about coming out at work. This is very stressful for him as he has no desire to go 'back in the closet'; he simply wants to feel comfortable around his new colleagues before divulging personal information. Now, however, he worries that he may never be able to be his true self at work, which he finds upsetting and demotivating. The CEO writes to the couple explaining that he will not be able to take them on as clients Will is shadowing Seth on some of his client meetings. One day, they have a scheduled appointment with some new clients – a couple – Dr Chris Glad and Mrs Heather Glad. Will notices that Seth is taken aback when the clients arrive and are both women, although they seem to take it in their stride, explaining that some people often expect Christine to be male due to the fact she prefers to go by Chris. The rest of the meeting is pleasant, although Will feels that Seth is a little tense and stand-offish, and the Glads seem happy with the recommendations given to them and the overview of service available. Their overall assets are on the lower side compared to the kind of clients the firm usually accepts, but Dr Glad's potential future earnings are significant, which would normally mean that the couple is a good candidate for becoming a long-standing client. After the meeting, Seth uses a homophobic term to describe the couple, going on to say "What a waste of time! I'll have to think hard before deciding whether to take them on as clients, especially since their assets are far below what we would normally expect of our clients." Will, stunned at Seth's attitude and his use of a homophobic term, mumbles something incoherent and explains he needs to go and start writing up the notes of the meeting. A couple of weeks pass, and Will notices that Seth has sent a letter to Dr and Mrs Glad explaining that, unfortunately, he will not be able to take them on as clients, as their assets do not meet the required threshold. It is a polite letter, which wishes them all the best for the future. However, Will is aware that a heterosexual client couple has recently been taken on who has assets lower than the Glads, and with lower future earning potential. Will wonders whether Seth has deliberately discriminated against Dr and Mrs Glad due to their sexuality. Even if this is not the case, he remains unhappy about the language Seth has used in relation to the LGBTQ+ community. Readers were asked what, if anything, should Will do next (voting is now closed). The options were: Quit. It's clearly not the right kind of environment for Will to work in. Write privately to the Glads, informing them of his suspicion that Seth did not want them as clients because of their sexual orientation. Speak to the chair and raise his suspicions that Seth may have discriminated against the Glads because they are a same-sex couple. He has no evidence that the Glads' sexuality was the reason for Seth not taking them on as a couple, so can do nothing in this regards. However, it may be worth him speaking to HR about the culture in the firm – which he feels is not fully inclusive. What, if anything, should Will do? Quit. It's clearly not the right kind of environment for Will to work in. Write privately to the Glads, informing them of his suspicion that Seth did not want them as clients because of their sexual orientation. Speak to the chair and raise his suspicions that Seth may have discriminated against the Glads because they are a same-sex couple. He has no evidence that the Glads' sexuality was the reason for Seth not taking them on as a couple, so can do nothing in this regard. However, it may be worth him speaking to HR about the culture in the firm – which he feels is not fully inclusive. --> This dilemma appears in the October 2021 edition of The Review magazine. The CISI's opinion and voting results will be published in the January 2022 edition === Title: Grey matters ethical dilemma: Message received StandFirst: Rob, an investment manager, becomes concerned after receiving a confidential work-related document via social media. What should he do? PublicBody: Rob is an investment manager who has recently joined AB International Investing, a mid-size fund management organisation, where he works directly with clients to help them achieve their financial goals. Rob's firm has recently made the decision to downsize its office space, so many of the staff are now based remotely and travel to the office once or twice a week. Working remotely, Rob and his team now schedule more video calls with clients and use certain platforms to share information securely. PrivateBody: We are currently recruiting for members to join the Disciplinary Panel and Appeals Panel. Should you wish to register your interest please send a CV and cover letter to standards@cisi.org Rob is an investment manager who has recently joined AB International Investing, a mid-size fund management organisation, where he works directly with clients to help them achieve their financial goals. Rob's firm has recently made the decision to downsize its office space, so many of the staff are now based remotely and travel to the office once or twice a week. Working remotely, Rob and his team now schedule more video calls with clients and use certain platforms to share information securely. One morning Rob receives an email from his client Kiran asking for an urgent callback. Kiran is six hours ahead of Rob and needs to speak to Rob before the end of her working day. Rob tries to send Kiran a video call link, but it does not go through as his internet connection is slower than usual. He notices a missed call from Kiran on both his business and personal phones. The signal on his business phone this morning has also been inconsistent, so he calls Kiran back from his more reliable personal phone. While on the call, Rob notices that he is having internet server issues, his emails are not being updated and he cannot access any client information remotely. Kiran needs to send him a signed document containing confidential data urgently. Rob tries to restart his laptop while on the phone, but as Kiran is on a deadline, she decides the best way to get Rob the data is to send it to his business phone directly via WhatsApp. The attachment comes through after a few minutes and Rob downloads the form, saves it, and emails it to his colleague for filing. Kiran decides the best way to get Rob the data is to send it to his business phone via WhatsApp The next month Rob and his colleagues are invited to a 'lunch and learn' held by the data protection team at his firm. The meeting focuses specifically on dealing with clients in the new remote settings. The data protection officer says that information must be recordable and auditable, which Rob and his team are familiar with, and speaks about the various types of data breaches. Rob considers his interaction with Kiran the prior month and whether he is in breach of the FCA Senior Managers and Certification Regime (SMCR) 'acting with due care and diligence' and 'observing proper standards of market conduct', which is also part of his professional body Code of Conduct. Rob's tensions continue to rise as he reads about a competitor's firm stating that they were victims of a data breach. The press release states that those impacted will be contacted in due course and measures have been put in place to ensure it does not happen again. Rob is feeling anxious and speaks to a colleague about his communication with Kiran. He is advised to speak to his manager. Following the firm's internal speak up protocol, he raises the issue with his manager, and his manager replies reassuringly, "WhatsApp is encrypted, and I get sent stuff like that all the time! Do not worry about it, and nothing needs to be reported to anyone – so let's keep it between us". Rob is meant to be feeling better about the situation after speaking up but on checking his professional body's SMCR toolkit, Rob still feels uneasy. He does not know if it warrants further action. Readers were asked what Rob should do next (voting is now closed). The options were: Agree with his manager. The data transfer over WhatsApp took place over a month ago. There is nothing more that can be done right now. For his own peace of mind, Rob should ask Kiran if she deleted the document on her WhatsApp to ensure there will be no further data issues. Rob should speak to the data protection officer casually without giving any specific details, as he does not want to be seen to be contradicting his manager. Rob should report his manager to the data protection officer, as he knows something does not feel right and his manager's inaction is incorrect. This dilemma appears in the March 2022 edition of The Review magazine. The CISI's opinion and voting results will be published in the September 2022 edition. === Title: Grey matters ethical dilemma: Not my problem StandFirst: Dee's former colleague Gemma is choosing to not self-report a criminal offence to her employer and her professional body. Should Dee take matters into her own hands? PublicBody: For three years Dee and Gemma worked at the same investment firm, Invest Plus. Dee has recently moved to a new role at another investment firm more local to her. Since the start of their working relationship, they have been sitting similar exams with the same professional body, which requires members to adhere to a Code of Conduct, including self-reporting any offences. They have supported each other through the exams and processes. They usually meet up once a week over coffee to compare notes and discuss areas of difficulty in their study material. However, over the past couple of weeks Dee has noticed that Gemma has been unusually stressed and agitated and just 'not her usual self'. She has been cancelling on Dee at the last minute and not keeping up with the reading material. PrivateBody: For three years Dee and Gemma worked at the same investment firm, Invest Plus. Dee has recently moved to a new role at another investment firm more local to her. Since the start of their working relationship, they have been sitting similar exams with the same professional body, which requires members to adhere to a Code of Conduct, including self-reporting any offences. They have supported each other through the exams and processes. They usually meet up once a week over coffee to compare notes and discuss areas of difficulty in their study material. However, over the past couple of weeks Dee has noticed that Gemma has been unusually stressed and agitated and just 'not her usual self'. She has been cancelling on Dee at the last minute and not keeping up with the reading material. Gemma has not informed her manager or her professional body about the conviction It's appraisal time at Invest Plus, and during their catch-up, Dee and Gemma talk about the appraisal system and how much they rely on the bonus, especially right after Christmas. While they are getting ready to leave, Gemma hesitantly tells Dee that she had to attend the magistrates' court the previous week because of a criminal offence which she had pleaded guilty to. Dee is shocked but tries to comfort Gemma and now understands why she has appeared so stressed recently. Gemma says that there is a chance that the story will be picked up by the local paper because she was pressed for a comment by a journalist, who approached her as she was leaving the magistrates' court. Gemma told the journalist she had been "finding work and personal life pretty stressful", which had led to some bad decision-making. Dee asks what the conviction was for, but Gemma looks at her phone and starts talking about the train times. Dee learns that Gemma has not informed her manager or her professional body about the criminal conviction. Dee encourages her to do so but Gemma says, "With appraisal time looming, I don't want it to impact how much bonus I will get. I just really hope it doesn't get published online." Gemma tells Dee she will inform the necessary people once the appraisals have been completed and her bonus has been paid. They then say goodbye to each other and take their trains home. The following month, Dee meets up with Gemma again and asks how things are going at work and at home, and Gemma confirms that she is feeling much better and less stressed now. Dee asks Gemma how her manager took the news about her conviction and finds out she hasn't mentioned anything to her manager, or her professional body. Readers selected one of the following options in response to the question of what Dee should do next (voting is now closed): Contact the professional body and anonymously report Gemma. Meet for coffee with the HR staff member, an old friend from Invest Plus, and casually mention that you overheard something about Gemma. Do nothing. The onus is on Gemma to report any disciplinary offences to her professional body and her employer, and she will have to declare it at some stage. Speak with Gemma again and advise her to report the criminal conviction a second time. This dilemma appears in the October 2020 flipbook edition of The Review magazine. The CISI's opinion and voting results will be published in the January 2021 edition. === Title: Grey matters ethical dilemma: Remotely challenging StandFirst: A junior manager faces a tough decision when his boss pressures him to bend the rules to speed up completion of a report. What should he do? PublicBody: Satish is an ambitious junior manager in the certifications team of a regulated wealth management firm. The firm experienced a difficult period some years ago, when it struggled to keep up with a greatly increased flow of regulatory reporting, the consequences of which led to adverse comments and warning of potential sanction by the regulator. As a result of these regulatory findings, the firm had recruited more staff but, given the pandemic, a number of people have been put on furlough, the majority of staff are working from home and there seems to be a growing trend within the company to make decisions in isolation. There is more work to do with fewer people and some managers are taking an 'out of sight, out of mind' attitude by reducing interactions with their teams on a day-to-day basis. PrivateBody: Satish is an ambitious junior manager in the certifications team of a regulated wealth management firm. The firm experienced a difficult period some years ago, when it struggled to keep up with a greatly increased flow of regulatory reporting, the consequences of which led to adverse comments and warning of potential sanction by the regulator. As a result of these regulatory findings, the firm had recruited more staff but, given the pandemic, a number of people have been put on furlough, the majority of staff are working from home and there seems to be a growing trend within the company to make decisions in isolation. There is more work to do with fewer people and some managers are taking an 'out of sight, out of mind' attitude by reducing interactions with their teams on a day-to-day basis. Satish, however, is conscientious and knows that the new certifications reporting process is very important. One of the biggest changes is the introduction of an internal reporting system, which is seen as increasingly onerous and somewhat irrelevant by those not involved in the firm's earlier problems. As a result, the requirement for an esignature by nominated position holders is not always followed to the letter. Eamonn suggests that Satish should sign the report on Eamonn's behalfApproaching the new reporting deadline, Satish is asked by Eamonn, his manager, to ensure that the new departmental management information (MI), which Satish coordinates and analyses, is up to date for discussion at the heads of division meeting, which is taking place on Zoom. Bearing in mind the previous and well-documented difficulties of his team, Eamonn will likely be the focus of attention as he will need to give an update on the new regulatory reporting process to the Board. Satish is feeling under some pressure, especially with the reduced headcount, and is working longer hours at home, including time at the weekends. He is determined to meet all his deadlines, conscious that his chances of promotion will be influenced by how well he performs at times like this, and fearful that he may be let go by the company if he doesn't, given the economic environment. The end of the reporting period approaches and Eamonn begins to press Satish for the MI in their online daily meetings. The firm's regulatory reporting unit also reminds Satish that his department's report is due and that it needs to be signed off by Eamonn. As his deadlines loom, Satish calls Eamonn and shares the MI report on screen, taking the opportunity to remind him to officially sign off the department's regulatory report, which will be ready the next day. Sounding exasperated, Eamonn says that he is too busy preparing for his meeting to be concerned about "that sort of stuff" and suggests to Satish that, if he is confident that it is correct, he should sign it on Eamonn's behalf. The firm's strict guidelines on the sign-off process stipulate that this can only be done by Eamonn, but Satish feels unable to say anything. The following day, his department's regulatory report is completed and sent to Satish to obtain Eamonn's signature. Satish tells his colleague that he will see whether he can get Eamonn to esign it, but he is extremely busy, and the meeting is soon. Satish calls Eamonn to ask him to sign the report. "I told you yesterday that you could sign it" says Eamonn. "It's only a report and you know what it is all about. You have my complete confidence – so take some personal responsibility." Readers selected one of the following options in response to the question of what Satish should do next (voting is now closed): Sign the report, keeping Eamonn happy. He will be knowingly breaching company rules, but as this is the first time, he hopes for the best. Insist that Eamonn sign the report. The report will be late, and the department will look bad once again. This may affect his chances of a promotion and possibly even his job. Ask another manager to sign off the report. It will make Eamonn look bad, but Satish is pressed for time. Explain to the regulatory reporting unit why Eamonn's signature is missing, saying that Eamonn authorised him to sign the report. This dilemma appears in the February 2021 flipbook edition of The Review magazine. The CISI's opinion and voting results will be published in the May 2021 edition. === Title: Grey matters ethical dilemma: Finding the will StandFirst: Ashwin's long-term client, Erica, has died and left him £5,000 in her will. Her daughters are contesting the will, saying she was vulnerable. What should he do? PublicBody: Ace Investment is a small finance business that provides many financial services for the local community, from everyday banking to asset management. Ashwin, the company's investment manager, lives locally with his family. He has been at Ace Investment for just over fifteen years and will soon be retiring. Erica had retired from her full-time job ten years ago and had been keeping herself busy working in the local shop, which she owned. She had been a client of Ashwin's since he started with the company and over the years, they had developed a strong relationship. Erica had a diverse portfolio with Ace Investment, with many assets, including her home and shop. PrivateBody: Take our one-question survey on vulnerable customers Ace Investment is a small finance business that provides many financial services for the local community, from everyday banking to asset management. Ashwin, the company's investment manager, lives locally with his family. He has been at Ace Investment for just over fifteen years and will soon be retiring. Erica had retired from her full-time job ten years ago and had been keeping herself busy working in the local shop, which she owned. She had been a client of Ashwin's since he started with the company and over the years, they had developed a strong relationship. Erica had a diverse portfolio with Ace Investment, with many assets, including her home and shop. One Tuesday morning, Ashwin received a call from Erica, who asked for an emergency appointment. In this meeting, which Erica attended alone, she explained to Ashwin how scared she was of what the future held for her because her health was deteriorating quickly. She became extremely emotional and Ashwin asked her how he could help support her through this. Erica told him she would like to update her will and get her financial affairs in order. She requested an update of her finances to share with her lawyer. Ashwin compiled the report and sent this across to her the next day. Ashwin became concerned a few weeks later when he noticed that Erica had not been at the shop. He was heartbroken when he heard that Erica had passed away, as she seemed to be in relatively good health when he last spoke to her. Erica's daughters say that Ashwin took advantage of their mother A month later, Ashwin received notification from A-Z Legal that he was a beneficiary in Erica's will. Ashwin was shocked to hear this, and after a further conversation with her lawyer and receiving the paperwork, he realised that Erica had gifted him £5,000. Ashwin had never been a beneficiary in a client's will before and he did not know what to do or how to proceed. He did not mention anything to his colleagues that day but took the letter home to consider in detail. Ashwin noted that while the will includes a provision to renounce the gift, he should not have to do so, as Erica specifically gifted him with the £5,000. He wondered whether he needed to notify his manager, and if it needed to be logged in the gifts and hospitality register, but as she had now passed away, should he need to complete it? Ashwin asked his friend for advice as he felt really conflicted and was due to retire soon, and his friend encouraged him to take the money in the will and "save it for a rainy day". By the time Ashwin arrives at work the next day, he has decided to take the money Erica left him and to notify his firm, should anything need to be logged in the gifts and hospitality register. While he is walking to his office he sees two ladies sitting with his director. Ashwin is called into the director's room after they leave. The two ladies had introduced themselves to the director as Erica's daughters, stating that Ashwin had taken advantage of their mother, who was a vulnerable person and increasingly more fragile in her later days. Ashwin had never met Erica's daughters, but she had spoken of them fondly. He is saddened that they think he took advantage of her vulnerability. Ashwin is left distraught after his meeting with the director, as he knows that he did not take advantage of Erica and she was not a vulnerable client at the time he spoke to her. He wonders whether her vulnerability heightened in the last few weeks. While she was legally capable of making financial decisions at their last meeting, she was emotional and stressed about her health. Ashwin wondered what more he could have done at the time, but was confident that she did not present herself as a vulnerable customer at the meeting. His director has already mentioned that the daughters will be contesting him as a beneficiary in the will. Readers were asked what Ashwin should do next (voting is now closed). The options were: Renounce his financial gift of £5,000 from Erica's will Proceed with granting Erica's wishes in her will and take the £5,000 that was gifted to him Speak to Erica's daughters and assure them that she was not a vulnerable client when she came to see him. Proceed with legal action against the family if they don't concede that he is entitled to the money. This dilemma appears in the June 2021 edition of The Review magazine. The CISI's opinion and voting results will be published in the October 2021 edition === Title: Grey matters ethical dilemma: Transfer authorised StandFirst: This dilemma, updated for 2023, was originally published in the June 2012 edition of The Review as 'Bonus points'. It incorporates the themes of conflict of interest, respecting others, and speaking up PublicBody: Ray has completed nearly a year of his first job in a small branch of a bank, which he joined straight from school. His recent appraisal says that he has performed well and shows great potential. Accordingly, he is not surprised to be told by the assistant manager that the branch manager, Christine, wishes to speak to him. Christine congratulates Ray on his performance and says that although, as a rule, staff are not able to participate in the bank’s bonus scheme until they have completed 12 months’ service, Ray has done very well and she wants to encourage him. She hands him an envelope, saying that because of the special nature of the payment and the bank’s rules on bonuses generally, he must ensure that he does not discuss it with anyone. Ray feels a little embarrassed to have been singled out but pleased to have made a good impression. PrivateBody: Ray has completed nearly a year of his first job in a small branch of a bank, which he joined straight from school. His recent appraisal says that he has performed well and shows great potential. Accordingly, he is not surprised to be told by the assistant manager that the branch manager, Christine, wishes to speak to him. Christine congratulates Ray on his performance and says that although, as a rule, staff are not able to participate in the bank’s bonus scheme until they have completed 12 months’ service, Ray has done very well and she wants to encourage him. She hands him an envelope, saying that because of the special nature of the payment and the bank’s rules on bonuses generally, he must ensure that he does not discuss it with anyone. Ray feels a little embarrassed to have been singled out but pleased to have made a good impression. He wonders if he has done anything wrong in accepting the money Ray enters the staff room where he opens the envelope and is pleasantly surprised to read that £500 has been transferred into his account. Christine includes a message saying that the bonus is her personal recognition of Ray’s hard work and good performance. Ray is a bit surprised at the comment which leaves him unsure whether the ‘bonus’ is from the bank or from Christine herself. Although Christine has told Ray not to mention the award to anyone, which is the bank’s normal rule regarding bonus payments, he feels unable to keep this to himself. On the way home, he texts his friend Dan, whom he had met on the bank’s induction course, suggesting they meet later for a drink. Dan, who works in another branch but lives nearby, readily agrees. Later that evening when Ray meets Dan, he says he’s had some good fortune and offers to buy him a drink, “not just the usual pint, but anything you like”. They order cocktails. The payment could imply all sorts of things Dan asks what has prompted this unusual generosity and Ray says that he is not supposed to tell anyone, but he has received a bonus. Dan expresses surprise, saying that they don’t qualify for the bank’s bonus scheme and that staff have been warned that bonus payments will be very limited this year, so Ray getting one must surely be a mistake. Ray tells Dan that Christine had said that the bonus was personal. Despite Christine’s warning, he shows Dan the letter. Dan reads it and says that he is very surprised, and it looks as though Christine has given Ray the money out of her own pocket. He says this is rather unusual and he hopes that Ray has not been asked to do anything unusual by Christine. Dan says that the payment might also be against the bank’s policy as it could imply all sorts of things but, even so, he is enjoying his drink bought with the proceeds of Ray’s bonus. Ray says that he is sure that he has done nothing wrong and suggests that they talk about something else, and the conversation turns to less controversial matters. At the end of the evening, they go their separate ways, not having said any more about Ray’s bonus, but Ray awakes in the early hours and has difficulty going back to sleep. He wonders if he has done anything wrong in accepting the money or if anything he has done at work might have led to him getting the bonus, but he cannot think of anything. Ray wonders if he should raise the matter with anyone in the branch, and if so, whom? He also wonders whether he should perhaps phone the helpline number that he was given on his induction, but he is unsure to whom he will be talking and if it will get back to Christine that he has called. That seems to be worse than doing nothing. In the end, Ray falls asleep with the matter unresolved. What should Ray do? (Voting is now closed) Approach Christine directly to clarify the situation and return the bonus. Notwithstanding that he has been told not to discuss it with anyone, Ray should report it to whoever is responsible for HR matters in the branch. Call a staff helpline and raise the matter. Do nothing. He was very fortunate to have received a bonus in these difficult times. === Title: Finding the will: The verdict StandFirst: Read the CISI's verdict on the Grey Matters ethical dilemma that appears in the June 2021 edition of The Review by Amrita Bhogal, CISI professional standards and ethics manager PublicBody: Read the June 2021 dilemma This Grey Matter, published in the June 2021 edition of The Review, presents a scenario where Erica, a long-term client of Ashwin's, has died and left him £5,000 in her will. Her daughters are contesting the will, saying she was vulnerable. So, what should Ashwin do now? Suggested solutions and results are as follows: Renounce his financial gift of £5,000 from Erica's will. (56%) Proceed with granting Erica's wishes in her will and take the £5,000 that was gifted to him. (15%) Speak to Erica's daughters and assure them that she was not a vulnerable client when she came to see him. (29%) Proceed with legal action against the family if they don't concede that he is entitled to the money. (0%) Responses received: 254 The CISI verdict The dilemma considers the sensitive nature of vulnerability, assessment of which has been increasingly discussed in the financial services sector. In the UK the FCA recently published guidance on this subject. It identifies four key drivers that increase the risk of customers finding themselves in vulnerable circumstances. These are health, life events, resilience, and capability. While option 4, to take legal action against the family, received no votes, 15% of voters believe that Ashwin should take the £5,000 that was gifted to him. However, would this have increased if the amount gifted to Ashwin was a smaller amount? Additionally, alongside using an assessment framework consistent with the FCA's guidance, what other policies and procedures should have been followed to make Ashwin's decision easier? Our recommended solution is option 1. As per the updated Code of Conduct principles 'Conflict of interest' and 'Client focus', it is important to always put the interest of clients and customers first, and to effectively manage any personal conflicts. After Ashwin was notified by A-Z Legal, he may have benefited from immediately speaking with his director to be as clear and informed as possible. In hindsight, it could have helped the director's conversation with Erica's two daughters. Selection of comments received from members Option 1 would be an implicit admission that the allegation of 'taking advantage' was true. This must be strongly rebutted, or Ashwin's professional standing could be called into question. Ashwin wasn't involved in drafting the will and therefore cannot be responsible for altering/influencing the changes to the will made by Erica. The daughters should be checking this with the lawyer who made the changes to the will as it's their responsibility to ensure the person is in the right state of mind when making changes. He should speak with the daughters and assure them Erica was not vulnerable when he last spoke to her, but he should renounce the bequest as it is causing distress to the family at a difficult time. He should also have checked with his compliance officer and senior management if it was appropriate to accept a bequest from a client before doing so. Any action he takes will affect the reputation of the firm. While he is perfectly entitled to accept the gift, it will most likely cost him the same to contest in court, also a court case would cause him considerable distress while defending his case. He should renounce the legacy immediately, while emphasising in writing for the firm's records that he was not aware of it nor of any vulnerability of Erica when last they met. He may choose to write in the same terms to the executors. Sadly, this is the only way to avoid a potentially long drawn out and painful dispute which might harm both Ashwin and his firm. Ashwin could arrange a meeting with Erica's lawyer and her daughters to show them the financial report was asked for by Erica when she was in stable health, and the lawyer should prove that the will was written in that time. This is a professional relationship so he should not benefit personally from it. His firms gift and hospitality procedures may require him to turn this down anyway, but even if it's allowed, then he shouldn't accept. Ashwin could donate the money to the charity. While Ashwin might be confident that Erica did not need to be treated as a vulnerable client, there is no way to prove that. He was unaware that he would be left £5,000 and for the sake of both his and the firm's reputation, renunciation is the only viable way to come out of the matter with any credit. Even though Ashwin is in the clear, there is a perceived conflict of interest. From a professional perspective he should take this course of action even though he is entitled to the gift. He should also speak to the daughters to explain his actions. Erica was clearly vulnerable at the time she drafted her Will and while she may well have left £5,000 to Ashwin he should not accept it as it brings himself, his firm and the sector into disrepute. Taking legal action against the family would be the wrong thing to do even though one might feel Ashwin is entitled to keep the gift in recognition of his advice to and friendship with Erica over the years, for which she wanted to show her gratitude. I think Ashwin should accept the gift but be allowed to tell his side of the story and confirm in his opinion that at the time of his last meeting with Erica, he did not consider her as vulnerable but as someone who was keen to ensure her final wishes were arranged to her satisfaction. He could, of course, donate his gift to a charity, perhaps an organisation that Erica may have supported herself but I do not feel the family have enough evidence of Erica's vulnerability to prove Ashwin was dishonest and took advantage. He should accept the gift as was intended, knowing that until Erica's last day he remained a trusted adviser and true friend. This verdict is published in the October 2021 edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Nothing to be proud of: The verdict StandFirst: Read the CISI's verdict on the Grey Matters ethical dilemma that appears in the October 2021 edition of The Review by Amrita Bhogal, CISI professional standards and ethics manager PublicBody: Read the October 2021 dilemma This Grey Matter, published in the October 2021 edition of The Review magazine, presents a scenario where Will, a new starter, has suspicions that his CEO has discriminated against clients in a same sex relationship. In this dilemma, what should Will do next? Suggested solutions and results are as follows: Quit. It's clearly not the right kind of environment for Will to work in. (6%) Write privately to the Glads, informing them of his suspicion that Seth did not want them as clients because of their sexual orientation. (2%) Speak to the chair and raise his suspicions that Seth may have discriminated against the Glads because they are a same-sex couple. (91%) He has no evidence that the Glads' sexuality was the reason for Seth not taking them on as a couple, so can do nothing in this regard. However, it may be worth him speaking to HR about the culture in the firm – which he feels is not fully inclusive. (1%) Responses received: 122 The CISI verdict The dilemma highlights the issues of discrimination and not being able to bring your whole authentic self to work. While organisations are learning how to create a positive corporate culture, this is something that must be instilled from top down, and in this dilemma, there seems to be a disconnect. Will has to deal with the issue that clients were potentially discriminated against because of their same sex relationship. Will should consider what action is the most impartial, straightforward and informed. The CISI Code of Conduct specifically highlights principles that may help Will reach his decision: Client focus; Conflict of interest; Speak Up & Listen Up Our recommended solution is option 3. It is important that every organisation has the correct tools to be able to raise a concern. In this case, Will should be able to speak to the chair in confidence to talk about the behaviour he has witnessed. This will provide him with the opportunity to understand more about the next steps and whether matters need to be discussed further. Selection of comments received from members Discrimination on the grounds of sexual orientation is an offence under the Equality Act, but Will might need to check why the heterosexual couple was accepted as clients first, just to reinforce his suspicion that discrimination has taken place. Hard one. He will have to quit eventually as it is the CEO. The question is whether reaching out to the chair would actually serve a purpose. Will must not 'accuse' Seth but raise a suspicion using the information that he has at hand. The CEO visibly has a bad opinion of same sex couples and should have had better judgement than to make homophobic statements, given the effect it could have on Will, not because of his sexual orientation but because he is a new recruit, and the CEO should be offering a better image to such a young person who could become homophobic as a result of this exposure. Writing to the Glads is a breach of work ethics and should not be pursued. Speaking to the chair seems to be the only proper active line of reaction to adopt. While it may not be clear that the Glads were turned down because they are a same sex couple, Seth did hear the homophobic term and this is unacceptable from anyone let alone the CEO who should be promoting an inclusive organisation and demonstrating an appropriate 'tone from the top'. This would be an extremely difficult step to take, especially being new to the firm, but hopefully the chair would be able to address this matter in an appropriate and professional manner that does not have a negative impact on Will and deals with any potential prejudice issues in the firm. Quit. Move on. The CEO will always be a stumbling block to any progression in the firm and Will won’t ever feel comfortable. Don't waste time and effort from within. Seek out an organisation which is really inclusive and doesn't use 'words' to say so. As a minimum Will should speak out about the use of the derogatory homophobic language by Seth. He should include in his speak out report his broader contextual concerns. If Will is nervous about speaking out transparently to Seth's line manager he should utilise the firm's whistleblowing procedures. He should consider quitting as well; it sounds like a toxic workspace, and the top-down culture is an offensive anachronism. This verdict is published in the March 2022 edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Message received: The verdict StandFirst: Read the CISI's verdict on the Grey Matters ethical dilemma that appears in the March 2022 edition of The Review by Amrita Bhogal, CISI professional standards and ethics manager PublicBody: Read the March 2022 dilemma This Grey Matter, published in the March 2022 edition of The Review magazine, presents a remote working environment in which Rob learns that information he received might not be recordable and auditable as per the regulatory standards. He has raised the issue with his manager and is told not to worry, so what should he do now? Suggested solutions and results are as follows: Agree with his manager. The data transfer over WhatsApp took place over a month ago. There is nothing more that can be done right now. (1%) For his own peace of mind, Rob should ask Kiran if she deleted the document on her WhatsApp to ensure there will be no further data issues. (4%) Rob should speak to the data protection officer casually without giving any specific details, as he does not want to be seen to be contradicting his manager. (20%) Rob should report his manager to the data protection officer, as he knows something does not feel right and his manager’s inaction is incorrect. (75%) Responses received: 367 The CISI verdict Globalisation and technology have allowed organisations to be internationally based with colleagues and clients from across the world. But it also increases the opportunity for data exploitation. Rob was sent information from his client abroad on his business phone via WhatsApp, but subsequently realises that something may have gone wrong. Rob has raised a concern with his colleague and is advised to ‘speak up’ to his manager. Rob’s manager, however, tries to ensure that the issue isn’t reported any further. Asking Kiran if she deleted the document on her WhatsApp (option 2) doesn’t transparently deal with the issue at hand. It may help confirm whether the document is still on the app, but doesn’t identify if the data was intercepted at any point. Speaking with the data protection officer casually (option 3) may help to keep everyone anonymous, but it doesn’t provide the data protection officer with the full picture. Our recommended solution is option 3. Rob should feel that something is not right. By speaking with the data protection officer, he will be better guided on the next steps. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please email ethics@cisi.org. Selection of comments received from members Rob has tried to do the best thing for his client but has inadvertently broken the rules so needs to report the breach. However, it sounds as though his manager has little intention of following the rules and breaches them regularly, so reporting them is the only option. I would be inclined to have a chat with the DPO regarding the use of WhatsApp before escalating the situation. When talking to the data protection officer he should tell him what happened with Kiran and what his response was – that he spoke to his manager and what he said. He should seek guidance on what to do next, e.g. ask Kiran if he has deleted the correspondence on WhatsApp. The document was posted by the client, which Rob had no control over. This will hopefully resolve the most important action of making sure the risk from the breach is resolved or minimised. However, Rob should also speak to his DPO for guidance on how to deal with this problem in the future. Such an act may lead to breach of data protection norms and needs to be reported to the concerned officer for prudent and apt course of action It does not seem necessary that he reports ‘him’. But he does have a responsibility to report the situation to the data protection officer. Understandable that he feels that he is doing the best for the client, but was there no handover or forwarding adviser to pass the information to? Start with option 2. See what the response is and consider further action from there, which may include contacting the DPO. The right thing to do in such circumstances is to discuss the situation with the DPO in advance for instruction and guidance. If in doubt Rob should report it to the relevant data protection manager. Rob should not just restrict this to reporting his line manager to the DPO. He needs to be open and transparent with the DPO and seek guidance on what to do next. Having had the casual conversation, if he is proved correct he can always escalate the problem by mentioning that he thinks other employees might be doing similar things, which would invoke a team wide action from the DPO without necessarily destroying his relationship with the manager. Rob should speak to his data protection officer to both report the potential breach so it can be recorded and so that he can receive formal advice on any further action he should take. For example, speaking to Kiran to make certain she deleted the document. This would not however be a 'casual' approach, not does it need to contradict his manager; it is simply the proper approach. Rob should not be concerned as in the specific time-constrained circumstances, he did act with due care and diligence on behalf of his client and ensured the document was quickly brought into the more formal, recorded channels. The phrase "let's keep it between us" is a huge red flag that a manager knows something untoward is going on. The fact the manager has admitted he gets “stuff like that sent to him all the time” is a damning admission. Not much choice other than to go direct to the data protection officer for advice. Rob's gut feeling tells him it's wrong. It's best to get it out in the open now as the consequences will be much worse if the regulator were to discover it in the future. Rob should be honest and upfront about what has happened, but there are also underlying issues with business continuity and his ability to work remotely. These should also be flagged and addressed to prevent workarounds outside of any company or regulatory policies and avoid any associated risks with using such workarounds. Rob should report both his own receipt of the documents by WhatsApp and his manager's response, and in addition advise Kiran that this has been done and why. At this stage I wouldn't necessary 'report' the manager. But I would most definitely speak to the DP officer to clarify what should have happened and if a breach occurred. Then follow up action can be agreed. As long as it was his business phone and not his personal phone. Rob should also advise the data protection officer of the situation and delete the relevant document from his own WhatsApp as well as ensuring that Kiran has done the same. Check what the process should be in case a similar situation arises in the future. This verdict is published in the September 2022 edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Fighting for the right? The verdict StandFirst: Read the CISI's verdict on the ethical dilemma that appears in the June 2020 flipbook edition of The Review PublicBody: Read the June 2020 dilemma This Grey Matter, published in the June 2020 flipbook edition of The Review, presents a scenario where a member of staff has been featured in the news and interviewed at an Extinction Rebellion protest outside their place of work. As they are your direct line report, what should be done next? Suggested solutions and results No formal action is required but you decide to speak with Lorena privately to remind her of what is expected of a senior member of staff. (24%) As the company has been indirectly associated with the Extinction Rebellion protests, and Lorena’s involvement has the potential to bring the company into disrepute, a formal investigation will be opened which would most likely result in disciplinary action. (41%) You give Lorena a verbal disciplinary warning as the company social media policy states “be careful discussing things where emotions run high (eg, politics and religion)”. (19%) Lorena’s actions brought the company into disrepute and interfered with her ability to do her job. The Board should be informed, and in order to mitigate any further potential risks, speak with HR advising them that Lorena should be suspended on full pay pending the outcome of further investigation. (16%) Responses received: 166 The CISI verdict This dilemma highlights some of the factors individuals should consider when exercising their right to protest and using social media. As an employee and company representative, Lorena should have been more aware of the potential impact of her words and actions. This Grey Matter is also one of the scenarios discussed at the CISI’s 2020 Annual Integrity event, held on 12 February. Before the panel discussion, delegates voted 31% in favour of option 1 (taking no formal action). After the discussion, this jumped to 67% in favour of option 1.The chart below shows the audience votes before and after discussing the dilemma Our recommended solution is option 2, alongside 41% of Review online poll respondents. While Lorena’s actions were carried out in her own time, she went viral on social media with her employer’s logo in the background. She could have instead used her position to promote better awareness and understanding of the climate issues raised by Extinction Rebellion. However, Lorena’s actions have now associated her employer indirectly with Extinction Rebellion, therefore Lorena should undergo formal investigation. This verdict is published in the October 2020 flipbook edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Test or release: The verdict StandFirst: Read the CISI's verdict on the Grey Matters ethical dilemma that appears in the September 2022 edition of The Review by Amrita Bhogal, CISI professional standards and ethics manager PublicBody: Read the dilemma This Grey Matter, published in the September 2022 edition of The Review magazine, explores the pressures of a manager, Meena, dealing with a new starter, Hiromi, who is not performing to par and has recently disclosed that he may have ADHD. After speaking with an external HR adviser, Meena offers Hiromi a formal assessment to better understand his needs, but he declines and the pressure on her to deliver is increasing. This dilemma was seen at the 2022 Annual Integrity Event, attended by around 1,200 in total (over 1,000 virtually and 160 in person) and the results are as follows: Wait to find out if she gets the new job and then quit her current one and not worry about Hiromi. The culture of the company is not great, her line manager hasn’t been very helpful, so maybe she should be the one to pick up the pieces. (4%) Ask Hiromi for evidence of ADHD or insist that he is formally assessed and speak with HR again about what this could mean for his employment. She might have to keep him and recruit another person to support with the role or find him another role internally. This will upset her line manager and might affect her perception of her performance. (27%) Raise the issue with a senior stakeholder at her organisation in the hope that they will provide better guidance than her line manager. She doesn’t want to be seen as a weak leader, but her line manager was not helpful and her advice conflicts with HR’s recommendations. (67%) Take matters in her own hands and be as impartial as possible, not letting Hiromi’s potential ADHD get in the way of the company’s performance. This means transferring him to another department or terminating his employment, but this might have a detrimental impact on Hiromi’s mental health. (2%) Responses received: 601 The CISI verdict The dilemma incorporates many themes from the CISI Code of Conduct, including professional development, awareness of capabilities, respecting others and the environment and speaking up and listening up. It also raises several concerns about Dynamic Business: poor company culture, poor internal processes and insufficient management training. Better internal processes may have made it easier for Meena to speak to her manager about the difficulties she was facing in her team and to receive the advice and support that would help her through the situation. And better managerial training would have helped Meena to speak with Hiromi and raise concerns about the quality of his work. Our recommended solution is option 3: receiving a second opinion and getting better guidance on next steps would be helpful to Meena as she seems conflicted with the advice already received. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please email ethics@cisi.org. This verdict is published in the March 2023 edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Test or release StandFirst: This dilemma explores the pressures of a manager dealing with a new starter who is not performing to par and has recently disclosed that he may have ADHD PublicBody: Meena joined Dynamics Business five years ago as head of operations and now manages a team of seven. She is good at her job but has found the past couple of years extremely difficult due to frequent staff turnover, with Operations Team leaders not lasting longer than six months due to the workload and the organisation not looking after its staff or making them feel valued. She has had three different Operations Team leaders over the past year and a half. PrivateBody: Meena joined Dynamics Business five years ago as head of operations and now manages a team of seven. She is good at her job but has found the past couple of years extremely difficult due to frequent staff turnover, with Operations Team leaders not lasting longer than six months due to the workload and the organisation not looking after its staff or making them feel valued. She has had three different Operations Team leaders over the past year and a half. Hiromi, the latest Operations Team leader, joined Meena's team from another department just over five months ago. He fits in well with the team and is liked by everyone. Meena has done her best to support him as she is keen to fill the position long term, but Hiromi is not delivering to the expected level. He is often given work that he forgets about and comes up with excuses when asked. Meena explains the work to him verbally and by email, and adds the deadlines to his calendar, but nothing seems to work. Meena has spoken to him about the issue and raised it again at their most recent weekly meeting, warning him that she will need to extend his probation period if things don't improve. Hiromi mentioned then that he thinks he has attention deficit hyperactivity disorder (ADHD), which might be affecting his ability to focus and deliver, but that he is not 100% sure. He avoided responding to Meena's question about whether he'd been formally tested. Meena is advised to choose between offering him a formal assessment or not extending his probation After the meeting, Meena thinks about their conversation. She wants to be fair and give him every opportunity to improve and succeed and does not want ADHD to stand in the way, but she is also under a lot of pressure to make sure that the department does well. She also wonders whether Hiromi was being honest. While Dynamic Business has a Speak Up framework, its representative no longer works for the firm. Meena therefore discusses the issue with her line manager, who dismisses it and puts more pressure on her to push Hiromi to deliver. Meena is concerned that this may have a negative impact on Hiromi's self-esteem and mental health. After all, she has a duty of care towards every member of her team. Meena decides to speak to the external HR company that her organisation employs to support employees. She meets with one of their advisers, explains the situation, and is given two options: she could not extend his probation period, given that he's not delivering, or the organisation could offer Hiromi a formal assessment, should he wish to accept it. If it is confirmed that he has ADHD, it would be best to keep him in his post and offer him extra support so that he can deliver or find a more suitable post for him internally, to avoid discriminating against him. Meena is overwhelmed by this advice. She wouldn't want to keep an employee who is unable to do his job, but she also does not want to discriminate against him. Despite her line manager disagreeing, she offers Hiromi a formal assessment, but he brushes it off, possibly out of fear of being discriminated against. To make things even more complicated, Meena is unhappy in her current job and has been applying for others. She has recently had an interview at a competing firm and will have her second interview in a couple of weeks. What should Meena do next? Wait to find out if she gets the new job and then quit her current one and not worry about Hiromi. The culture of the company is not great and her line manager hasn't been very helpful, so maybe she should be the one to pick up the pieces. Ask Hiromi for evidence of ADHD or insist that he is formally assessed, and speak with HR again about what this could mean for his employment. She might have to keep him and recruit another person to support with the role or find him another role internally. This will upset her line manager and might affect her perception of her performance. Raise the issue with a senior stakeholder at her organisation in the hope that they will provide better guidance than her line manager. She doesn't want to be seen as a weak leader, but her line manager was not helpful and her advice conflicts with HR's recommendations. Take matters in her own hands and be as impartial as possible, not letting Hiromi's potential ADHD get in the way of the company's performance. This means transferring him to another department or terminating his employment, but this might have a detrimental impact on Hiromi's mental health. --> This dilemma appears in the 30th anniversary edition of The Review magazine. The CISI's opinion and voting results will be published in the October 2022 edition. === Title: Retail Distribution Review ten years on: the verdict StandFirst: It came into force in December 2012 but still sparks fierce debate in the UK and beyond by Tim Cooper PublicBody: The Retail Distribution Review (RDR) initiated a broader and tougher regulatory regime for the UK financial advice sector and became a template for improving standards and consumer outcomes in other countries such as South Africa, Australia and Canada – with varying degrees of success and controversy. The Financial Services Authority (FSA), the predecessor to the Financial Conduct Authority (FCA), launched the RDR in 2006 to tackle bad practices in the retail advice market, including mis-selling, poor value for consumers, and unnecessary services. The rules, which came into effect in late 2012, included raising the minimum level of adviser qualifications, removing commission payments on products and improving transparency of charges and services. PrivateBody: The Retail Distribution Review (RDR) initiated a broader and tougher regulatory regime for the UK financial advice sector and became a template for improving standards and consumer outcomes in other countries such as South Africa, Australia and Canada – with varying degrees of success and controversy. The Financial Services Authority (FSA), the predecessor to the Financial Conduct Authority (FCA), launched the RDR in 2006 to tackle bad practices in the retail advice market, including mis-selling, poor value for consumers, and unnecessary services. The rules, which came into effect in late 2012, included raising the minimum level of adviser qualifications, removing commission payments on products and improving transparency of charges and services. This raising of standards brought great expectations for some in the industry – and fears for others. For example, at the time of RDR’s introduction, there were concerns about it causing an exodus of advisers from the industry. The number of retail investment advisers (RIA) did fall around the run up to and introduction of RDR, with the FSA reporting that in 2011, 62% said the RDR professionalism requirements were “very influential in their intention to leave, whereas in 2012 this proportion had fallen to 41%”. The FSA attributed the 2012 figure to large wealth managers, banks and life companies closing or downsizing their RIA divisions, early retirement, or leaving the industry. But that trend subsequently reversed, and in 2019, the number of advisers was 4% above 2012 levels, according to the FCA’s 2020 evaluation of the impact of the RDR and the Financial Advice Market Review. Early signs of improvement In an earlier post-implementation review of RDR, published in 2014, the FCA finds early signs of improvement across the advice industry, with fewer high-commission products sold and product and platform costs falling. Its 2020 evaluation finds that access to, and affordability and quality of advice, all improved between 2017 and 2020 and the number of complaints fell from 2,197 in 2016/17 to 1,635 in 2019/20. However, the full review acknowledges an advice gap, finding that wealthier consumers with £100,000 or more in investible assets “tend to engage more with the market, [accessing] both guidance and financial advice at a higher rate than less wealthy consumers”. To help tackle this, the FCA is now proposing a simplified framework for financial advice on mainstream investment products. Consumer use of support services Source: Evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review Did RDR meet its goals? The roots of RDR date back to 2002 and a review by David Jackman, then head of education and ethics at the FSA. This proposed raising professional standards in the advice sector, a goal that eventually became general policy at the regulator as part of RDR. Jacqueline Lockie CFP™ Chartered FCSI (Financial Planning), financial planning consultant at Lockie Consultants, sat on the panel that reviewed qualifications in preparation for RDR. She says: “Significant areas were missing. For example, there was no mention of multi-factor models, which describe the returns on an asset with regard to a set of systematic risk factors, such as market capitalisation, value/growth characteristics and profitability. Some subjects, such as investment trusts, were very light in content. I was glad of the opportunity to add those missing elements.” Jacqueline says that she believes many of the expectations of RDR were met and the FCA is now widely viewed as a leading regulator globally, at least partly due to the review. She believes that higher entry-level qualifications have helped consumer outcomes and driven the development of more dynamic tools, such as cashflow planning software, and a better understanding of client goals. Removing commission separated the costs of advice and products, thereby improving clients’ understanding of what they are paying for and enabling them to judge whether the service being provided is worth the cost. This has also driven advisers to improve customer service by being clearer on what services a firm offers, the costs of that, and how they explain that to clients, she says. Banning commissions and improving qualifications also supported better investment outcomes. For example, it helped increase adviser use of closed-end investment trusts (which never paid commission) sixfold between 2012 and 2021, from £219m to £1,298m, according to AIC figures. Compared to open-ended funds, investment trusts can access a wider range of asset classes, take a longer-term view of performance and deliver more consistent income streams. Charging debate There is still fierce debate in the adviser community about exactly how much RDR has impacted advisers’ charging models. A criticism around the time of the launch of RDR was that its initial aims were watered down by allowing advisers to take remuneration through so-called ‘adviser charging’. In January 2011, in written evidence to the House of Commons’ Treasury Select Committee, chartered financial planner Phil Mines defends RDR’s founding principles, arguing: “This misconception harboured that advice is free needs to be corrected ... ‘it is all included in the policy charges’ has been the rogue’s explanation for too long. “The RDR should not be watered down,” he writes. “[It] is the first sensible bit of action a regulator has taken. It would be a shame for vested interest to destroy what should be a defining point in UK financial planning.” The debate around adviser charging rumbled on and came to a head during the pensions transfer scandal, in which contingent charging – payment contingent on a transfer taking place – appeared to create a clear bias and not be in the spirit of RDR. The FCA first highlighted its concern about this issue in 2017 and eventually banned contingent charging on pension transfers in 2020. Many had adopted the so-called new model even before RDR startedRobert Reid CFP™ Chartered MCSI, director of Syndaxi Financial Planning, says that there’s been some improvement in the UK but “some advisers are still taking 3% upfront when they sell a product”. He says that he has doubts about whether advisers are following the rules to disclose charges at the start. But Phil Billingham CFP™ Chartered FCSI (Financial Planning), director at Perceptive Planning, says the criticism about adviser charging may have been fair at the time, but ten years on things have changed. He says that initially, the first advisers to work under the RDR rules would have been taught to inform clients that the charges were “their money,” and that they could switch advisers should they want or need to. Phil disagrees with Robert’s contention that some advisers are still taking 3% upfront. He says that advisers began to move away from charging 3% initial charges/ fees and to increase transparency when it came to their fees. “Now, 1% upfront would be a lot, and most advisers’ revenue comes from ongoing fee income,” he explains. Regarding the regulator’s aim of reducing the cost of advice, he says: “RDR’s designers seemed to think all clients want the same type of service. But we all drive different cars for different reasons, often little to do with price. In the same way, advisers can charge 0.5%, 0.75% or 1%, depending on what service their clients want. “Clients will cheerfully pay these fees because the adviser’s role and what they deliver for that is much clearer post-RDR, and their delivery has become more systematic and thoughtful.” The quality end of the advice market has been less affected. For CERTIFIED FINANCIAL PLANNER™ professionals, RDR did not necessarily make much difference because many had adopted the so-called new model even before RDR started. This model usually includes full independence, higher-level qualifications, services and professional standards and focuses on ongoing relationships rather than one-off transactions. Turning distribution on its head Phil says the advice market was previously a top-down environment in which wholesale managers dictated adviser payments. Now it is bottom up, with clients paying a fee to the adviser, and product cost is separate. This has put advisers in a much stronger position, he says. According to Phil, wholesale management firms used to routinely encourage advisers to sell “expensive, clunky legacy products”, which they can no longer do in the new environment, where the adviser holds more power. "The world is a better place,” he adds, explaining that large manufacturers now take a smaller portion of the overall charge. “This allows new model advisers to take more and become more profitable.” During RDR’s introduction, Phil says there was a general realisation in the industry that lots of money was going to large companies that ultimately delivered little value. As such,” high-commission products disappeared almost overnight,” he says, adding that advisers have since been better able to demonstrate that they do most of the work and can take on most of the responsibility and regulatory compliance burden. Further, clients now better understand that it’s the advisers who in fact understand their specific circumstances and goals and are more willing to pay for that value add. “They [advisers] can set their charges accordingly, rather than being dictated to,” he says. Further consequences Revenue may have increased for many advisers, but for others RDR also increased costs in paying for better education and documenting advice processes. Additional costs have meant some advisers can no longer afford to service less affluent clients. A 2020 survey from Octopus Investments called Bridging the gap supports this point, finding that 60% of financial advisers had turned away prospective new clients in the preceding 12 months. This advice gap between wealthy and less well-off clients appears to be widening. According to a survey of over 2,000 British adults in 2021 by UK robo-adviser OpenMoney, the number of people who want to pay for advice but can’t afford it grew from 5.4 million in 2015 to 6 million in 2021. This contradicts the FCA’s 2020 review that says that affordability has increased. Reforms in other countries Following RDR, several other countries have proposed or introduced regulations aiming to improve the financial advice sector. South African authorities initially proposed regulations, also called RDR, in 2014. These are taking some time to implement but the first of three phases – involving better minimum qualifications – has been rolled out. Phil Billingham says progress in South Africa has been slow because it has an extra layer of complexity and challenge in effectively having two markets – one ‘first world’ and sophisticated, the other a ‘developing world’ market of people who don’t have enough money to pay for advice but still need it. “It would never be acceptable to disenfranchise that whole market from advice,” he says. “So South Africa’s RDR is still a work in progress with different levels of implementation. But it is committed to improving qualifications, transparency, and control for consumers.” In Australia, the Future of Financial Advice reforms became mandatory in 2013 but were subsequently amended several times to reduce the regulatory burden on firms. The Australian government only removed a grandfathering arrangement for commissions in 2021. Regulations in Canada have included Client Relationship Model 2 reform (CRM2) in 2015, to improve transparency around fees and investment performance. And Canada’s 2019 Client Focused Reforms (CFR) aim to improve advisers’ product knowledge and enhance disclosures further. Calgary-based Bram Houghton CFP®, wealth adviser at CIBC Wood Grundy, says the industry in Canada has been moving towards fee-based servicing, which better aligns client and adviser goals. “CRM2 was largely successful in providing additional disclosure to clients, although there were some difficult conversations as advisers explained the new statements and the true fees paid to both advisers and fund managers through MERs (management expense ratio),” he says. “CFR is more recent and it’s hard to measure the benefits yet. Increased regulation for advisers to know their product should improve value to the client. “But a by-product has been Canada’s big banks closing third-party retail distribution channels due to the cost of compliance, leaving investors with fewer options. This is the opposite of the intended outcome to enhance client experience through product accountability and integrity.” Phil says that Australia’s version of RDR – the Future of Financial Advice – is similar to others in its approach to qualifications, fees and disclosures, but that rules seem to have been imposed in “tougher” ways, with advisers suffering more micromanagement than their UK or South African counterparts. According to Phil, Australian advisers have said that the new rules mean they can no longer afford to look after their clients, resulting in the rollout of newer but more complicated products. “They are trying to solve the next problem with an old solution,” he says, adding that an “advice gap” has been created in Australia’s market. “Wherever there is an advice gap, we need simpler products that don’t need sophisticated regulation adding to the cost,” he explains. “Since the pandemic, we’ve learned how to handle things virtually, which can reduce costs significantly. The solutions to looking after small clients were already there; we just didn’t know how to use them.” Did RDR achieve its aims? The UK regulator’s reviews have shown, and many commentators agree, that the UK’s RDR was successful in many of its aims of increasing transparency, fairness and professionalism. Most advisers believe the raising of professional standards and increase in transparency around charges has improved the overall quality of advice customers receive. However, there is still work to do in areas such as addressing the advice gap and debate continues over other challenges such as adviser charging and whether individual advisers are being as transparent as they should be. These debates will no doubt continue to inform RDR-like regulation in other countries though they face many different local challenges. === Title: Remotely challenging: The verdict StandFirst: Read the CISI's verdict on the Grey Matters ethical dilemma that appears in the February 2021 flipbook edition of The Review PublicBody: Read the February 2021 dilemma This Grey Matter, published in the February 2021 edition of The Review, presents a scenario where Satish, a junior manager, faces a tough decision when his boss pressures him to bend the rules to speed up the completion of a report. So, what should he do? Suggested solutions and results Sign the report, keeping Eamonn happy. He will be knowingly breaching company rules, but as this is the first time, he hopes for the best. (0%) Insist that Eamonn sign the report. The report will be late, and the department will look bad once again. This may affect his chances of a promotion and possibly even his job. (52%) Ask another manager to sign off the report. It will make Eamonn look bad, but Satish is pressed for time. (10%) Explain to the regulatory reporting unit why Eamonn's signature is missing, saying that Eamonn authorised him to sign the report. (38%) Responses received: 291 The CISI verdict The dilemma illustrates the difficulties working in an organisation that does not adhere to the fundamental processes it has put in place. In this dilemma, you can understand the difficulty Satish goes through to get sign off from his manager, which should not have been an issue. It raises concerns about the culture of the workplace and whether other policies and procedures have not been complied with. The sign-off process was implemented due to the adverse comments and warning from the regulator to reduce the margin of error. Our recommended solution is option 2: Our updated Code of Conduct principle, 'Aware of Capabilities', states that you should "decline to act on any matter about which you are not competent or qualified unless you have access to advice or assistance to carry out the work in a professional manner". In this instance, Eamonn failed to provide that assistance. It may make the working relationship between Satish and Eamonn more difficult, but of the options it is the most straightforward and transparent. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us as ethics@cisi.org. This verdict is published in the June 2021 edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Not my problem: The verdict StandFirst: Read the CISI's verdict on the Grey Matters ethical dilemma that appears in the October 2020 flipbook edition of The Review PublicBody: Read the October 2020 dilemma This Grey Matter, published in the October 2020 edition of The Review, presents a scenario where Dee's former colleague Gemma is choosing to not self-report a criminal offence to her employer and her professional body. So, what should Dee do next? Suggested solutions and results Contact the professional body and anonymously report Gemma. (27%) Meet for coffee with the HR staff member, an old friend from Invest Plus, and casually mention that you overheard something about Gemma. (2%) Do nothing. The onus is on Gemma to report any disciplinary offences to her professional body and her employer, and she will have to declare it at some stage. (4%) Speak with Gemma again and advise her to report the criminal conviction a second time (67%) Responses received: 345 The CISI verdict This dilemma focuses on the importance of declaring disciplinary matters to your employer and professional body. As a member of a professional body, it is your responsibility to declare in a timely manner any disciplinary history that may affect your suitability to remain a member. You can find out more information about reporting a disciplinary matter at cisi.org/conduct. You can also get in contact with the Professional Standards department at standards@cisi.org In this scenario, Dee knows that there is more that Gemma needs to do. While it may be a difficult and uncomfortable conversation, it is important that Dee lets Gemma know that by taking no action, it could result in harsher consequences by her employer or professional body later down the line. Our recommended solution is option 4: Speak with Gemma a second time and advise her to report the criminal conviction. Within the financial services sector, we need to be more confident in raising concerns and speaking with peers where we can. Providing guidance and advice to a friend or colleague can go a long way. It could give Gemma the courage that she needs to speak up and declare her conviction to the necessary people. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us as ethics@cisi.org. This verdict is published in the February 2021 flipbook edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey Matters ethical dilemma: Question Time StandFirst: Gathering personal information can benefit customers and companies alike. But how far should one firm go when justifying its pursuit of client data? PublicBody: PrivateBody: You have recently moved to the marketing department for the retail division of a large bank. As part of your familiarisation, you are invited by your manager to accompany her to a meeting of the division's product review committee, which convenes quarterly to consider all aspects of new products before they are released into the market. She tells you that she does not think that anything particularly contentious is likely to be discussed and asks you simply to take notes. You attend the meeting, at which there are representatives from Marketing, Risk, Line Management and Compliance. All those present are senior to you and you feel pleased that you have been invited. A number of relatively straightforward matters are discussed that generate very little comment and you simply take notes as requested by your boss. The meeting comes to the last item on the agenda, which is described simply as a fixed income fund-product replacement. The new product team sponsor introduces the product and stresses that one of the principal attractions is that it is really only a modification of a previous product, which was withdrawn a short while ago so as not to confuse customers. Although the products are broadly similar, the new product does have a number of features that are different, but nothing that should alarm the bank's mainstream customers. No customers will be disadvantaged by the proposed questionnaireThe line manager says that he is very keen to have the new product to sell if his team is to meet its sales target. He says that the fact that it is evolutionary rather than revolutionary will be helpful since it is always a challenge to convince customers to buy something new, particularly if it contains anything that is not very obvious. Notes on a scandal You listen to the discussion and make notes that stress the replacement nature of the product and the fact that the Risk department considers that it is no riskier than the product it replaces and can therefore be sold to customers with a similar risk appetite. Your boss then says that she has been considering how the bank can most effectively identify those customers to whom the product would be attractive, in order to improve the prospect of successful sales - the mass mailing of customers is rather unscientific and historically has a poor success rate. Accordingly, she suggests that the bank should take advantage of the widespread publicity within financial services about the need to 'know your customer' and introduce a 'pop-up' questionnaire into the online banking screen, asking customers to provide information about their finances. She says that this will enable the bank to identify more easily customers who are more likely to buy the product and will immediately enable the bank to dismiss the great bulk of these, for whom the product will be unsuitable. One of the other attendees, who you were told subsequently was from Risk, asks how branches, in particular, may react if customers ring up and complain about this 'pop-up' questionnaire. In response, your boss suggests that a simple question-and-answer sheet should be drawn up and circulated to accompany the branch marketing pack. This would stress the regulatory requirement of 'knowing your customer' and can be supported by quoting customers' financial protection, as well as being part of ongoing anti-money laundering requirements. The representative from Compliance says that this is something of an exaggeration but, since it is not false, he would not object to it. No customer will be disadvantaged by this proposal and it could be argued as being within the parameters of Treating Customers Fairly. You return to your office and your manager asks you what you thought of the meeting. Not wishing to bring your career to an immediate halt, you hesitate before replying and various thoughts run through your head. What would you do You are reassured that these sorts of things are discussed these days, as the last thing that banks can afford is another scandal of the payment protection insurance type. You are a bit concerned that the justification for asking customers questions that they may regard as an intrusion is not really valid. You feel that, as a newcomer to the team, you are not in a position to comment (subtext: you are appalled at what you regard as rather cavalier behaviour towards the bank's customers). You feel strongly that the proposed justification for the questionnaire is entirely bogus and that if the team cannot come up with a good reason, it should approach customers in another way. The CISI verdict The Question Time dilemma appeared in the March 2014 edition of the Review, with members invited to register their favoured response and leave supporting comments in a survey on the CISI website. A significant majority of respondents supported the view that if it was felt that the justification for the questionnaire was bogus, then the team must come up with another approach, which is reassuring. Nevertheless, you did not actually say anything at the meeting and it was not suggested by any respondents that thinking the right thoughts is all very well, but only a first step, towards taking the right action. In this case, making clear to your manager what was said and why, together with the decision reached and then making clear your concern at what was proposed. Recent articles in the personal financial pages of national newspapers have drawn attention to the increasingly intrusive nature of questions being asked of both new and longstanding customers, not only of banks, but also stockbrokers, under the guise of both anti-money laundering and know your customer. Whilst it is unlikely that this trend is going to decline, it is important that firms do not use these regulations as a smokescreen for general information gathering, which may equally well fall foul of data protection legislation. === Title: Grey Matters ethical dilemma: A little local difficulty - the CISI verdict StandFirst: All is not what it would initially seem for a non-executive director when he eagerly takes on the role. PublicBody: PrivateBody: Derek, a compliance specialist with many years practical experience is pleased when he is invited to become a non-executive director of Comeco, a small private company that trades in agricultural futures. This is his first directorship and represents something of a change of focus for him, but he is hopeful that it may be the first step on the path to more such opportunities. Before accepting the position, Derek receives an in-depth briefing about the company from Lawrence, the Managing Director with whom he develops positive chemistry and quickly decides to seize the opportunity. It appears that Lawrence has been closely involved in developing the firm's systems and documentation and it seems clear to Derek that he is the driving force behind Comeco. Shortly after attending his first Comeco board meeting, Derek becomes vaguely aware from informal discussion amongst his new colleagues that Lawrence may be experiencing "a little local difficulty" with the regulator concerning another, apparently unconnected business with which he is associated. Derek wonders whether to raise the subject, about which his colleagues appear not to have any detailed knowledge, nor to be particularly concerned. But as the 'new boy' he decides that he will say nothing, not wishing to raise the subject directly with Lawrence who is, quite clearly, the dominant figure in the business. As part of an expansion strategy, which was one of the ostensible reasons for inviting Derek to join the board, Comeco wishes to diversify its activities, which will require additional regulatory authorisation and Derek is responsible for overseeing this at board level. Following informal discussion with the regulator about the extension of the firm's authorisation, Derek is concerned to learn that this may be difficult if Lawrence remains a Director of Comeco, as it appears that Lawrence has interests in another, apparently unrelated business, which is under regulatory scrutiny. On reflection On learning this, the Directors of Comeco, meet to discuss this unexpected problem, without Lawrence being present. While considering what they might do to gain regulatory permission, Derek reflects that he should have satisfied his earlier curiosity about the nature of Lawrence's 'difficulties'. After lengthy discussion, which contains very little tangible information about Lawrence's interests outside Comeco, the directors conclude that the only obvious way forward is to ask Lawrence to resign from Comeco. Accordingly, the Chairman raises the subject with Lawrence and suggests that, given the potential regulatory interest in his other activities, he should either resign from Comeco, or resign from these other activities. After an initial attempt to bluster his way out of this apparent ultimatum, Lawrence retreats to his large country house and nothing is heard for some days until he suddenly faxes in his resignation from Comeco, without comment. Comeco duly notifies the regulator of Lawrence's resignation as a director and consequent de-registration as an Approved Person of Comeco. Following this, the directors are very pleased when Comeco's application for further authorisation is approved. Nevertheless, Derek gets a sense that some of his fellow directors continue to have contact with Lawrence but there is nothing he can really put his finger on and, as they were all colleagues previously, perhaps it is not surprising if personal contact continues. An unexpected development One morning, Mary, a fellow director asks Derek if he has seen the story about Lawrence and a firm called Beehaven, which is running in a number of papers. Beehaven appears to be the name of the other firm with whom Lawrence was associated while MD of Comeco. The article mentions a notice published by the regulator in which Lawrence and Beehaven are censured and fined for some significant rule breaches, including the adequacy of their client documentation. Derek is shocked at these revelations and worries whether Comeco may have similar weaknesses, bearing in mind Lawrence's central role in the development of the firm's client documentation and systems. Derek raises his concerns at the next Board meeting but is assured by his colleagues that, to date, there have been no significant problems, with any systems or documentation and that he should not worry unduly. A coincidence, or perhaps not? On completion of a busy and successful year, Comeco is subject to a scheduled regulatory visit. Things progress well until the regulator begins to review Comeco's client documentation and after several days of the regulator digging through files it becomes clear that all is not well. It transpires that they have found some serious flaws in a number of key client documents, including Comeco's terms of business. Equally worrying is an allegation by the regulator that, despite his resignation, Lawrence appears to have an ongoing involvement with Comeco, to the extent that he may be in the position of acting as a shadow director. Although Derek is unaware of any specific working relationship between his colleagues and Lawrence, he does recall his earlier unease that Lawrence's departure was not as final as it appeared. The regulator indicates that it is minded to commence disciplinary proceedings against Comeco as a result of the discovery of the problems with the firm's client documentation and the continued involvement of Lawrence. Derek is now seriously concerned at this latest development and again reflects upon his own actions as a director since joining Comeco. The CISI verdict The dilemma was published in the Review digital edition, with members invited to register their favoured response from four options and leave supporting comments in a survey on the CISI website. The Institute received nearly 100 responses and the great majority of these (90%) felt that option B, in which Derek offers to oversee an urgent investigation into those areas of Comeco for which Beehaven (Lawrence's other firm) had received regulatory censure. A further 9% felt that he should resign immediately on the basis that the situation at Comeco was not what Lawrence had led him to believe. One respondent felt that Derek should approach the regulator on behalf of Comeco in order to give himself the opportunity to avoid blame if problems were subsequently identified at Comeco. The Institute's view is shared with the majority. Derek needs to use the skills for which he believes he was hired to try to identify and redress any weaknesses within Comeco that he may have overlooked or not looked for while Lawrence was running the firm. Resignation would be an appropriate action if Derek honestly felt that he had done everything that he should have, whilst Lawrence was running Comeco and that Lawrence had deliberately concealed his activities. If a subsequent regulatory review takes place and Derek is criticised for failing to do things that he should have or made himself aware of things that should have been his responsibility, then resignation may certainly be appropriate at that time. === Title: Grey Matters ethical dilemma: On expenses StandFirst: When a bank manager is embroiled in questionable expense claims, he considers whether whistleblowing is the right option PublicBody: PrivateBody: Gavin is a manager in the accounts department of Harmani, a self-contained subsidiary within Bettabank, a major banking group. The structure of the group means that Harmani has separate reporting lines to the main company within Bettabank, with whom it transacts large amounts of business. The business that it transacts on behalf of Bettabank is obtained as a result of the reputation of Harmani, for providing a high level of service. Matthew is a senior manager within Harmani and, as well as overseeing the company's operations, is responsible for liaising with Bettabank and its clients. Consequently, he is frequently involved in client meetings with his colleagues from Bettabank, who have a fairly expansive attitude towards the financing of hospitality – 'corporate' or otherwise – and who lose no opportunity to entertain clients and sometimes just themselves. Matthew is concerned about this attitude but Hamish, his main contact in Bettabank, and who is the equivalent of Matthew's own senior manager, tells him that Bettabank's expense and entertainment policy is now so restrictive that he is embarrassed to entertain the type of client whom he is seeking to attract. Accordingly, he asks Matthew to pick up the costs, since Harmani does not suffer the same restrictions as Bettabank and, as Hamish tells Matthew, Harmani gets the main benefit of the business obtained. Gavin is frequently asked to process these expense claims, which he feels are increasing in frequency and amount. He mentions this to Matthew, telling him that he is uncomfortable about what he is being asked to do. Matthew agrees that the situation is difficult, but Harmani benefits from the business obtained and that this is reflected in everyone's remuneration. Whistleblowers, however right they may be, often suffer retribution Tacit acceptance Gavin takes his findings to Matthew, saying to him that, while he accepts that it is not for him to tell a senior manager what to do, he feels that something ought to be done to stop what appear to be entirely spurious entertainment expenses, incurred by Bettabank, being paid for by Harmani. Matthew thanks Gavin for sharing this information with him, but says that while he also finds it distasteful, it is a part of business life, whatever the Bribery Act may say, and in any case his Senior Executive, Robert, is aware of what is going on and appears tacitly to condone it. Gavin is disappointed at this response, but decides that he will continue to monitor the expense claims, which continue unabated. He wonders what action, if any, he can take. In the meantime, he receives an invitation from his professional body to a continuing professional development event on the topic of whistleblowing and he decides to attend. At the event, Gavin hears about the increased emphasis being placed on whistleblowing by regulators in the US and how the topic is being raised increasingly in the UK by both the regulator and the Government, following a series of financial scandals in the industry. This leads Gavin to wonder whether whistleblowing might be an appropriate response to the situation regarding expense claims that he finds so troubling. If so, what should he do and to whom should he blow the whistle? Weighing up the options On his way home, Gavin mentally reviews his possible courses of action, conscious of the warning from the evening's speaker that whistleblowers, however right they may be, often suffer retribution seemingly greater than the people on whom they are blowing the whistle. He considers a number of options: • Gavin has tried to persuade Matthew that something should be done, but without success, it is unlikely he would be very receptive to a further approach. Indeed, Matthew's own boss apparently knows what is happening and seems disinclined to take any action. Gavin concludes that he should simply ignore the matter as not being his problem, hoping that someone else will pick it up. • He might advise Internal Audit, but is concerned that he is involved in the chain of events himself, since he has authorised his team to process all of the expenses claims. Although the books have been reviewed, internal audit may not be happy to be told that it has missed matters that it might have picked up. • He wonders whether it might be better to report to Compliance and seek to insulate himself from any investigation, but thinks that is unlikely and so is concerned at what his position might be. • He vaguely recalls that the Bettabank group (which includes Harmani) has an external whistleblowing helpline and he considers using that, but wonders how secure it is, or whether, as with his concerns about Compliance, the whole matter may rebound on him. The CISI verdict The On expenses dilemma appeared in the April 2014 edition of the Review, with members invited to register their favoured response and leave supporting comments in a survey on the CISI website. The situation produced a spread of opinions with an equal percentage (11%) voting to ignore the matter, hoping that someone else will pick it up, and wanting to report to compliance. However 50% felt that reporting to internal audit was the right course of action, producing a large majority in favour of reporting the matter to one form or another of control function. Although in a minority, over a quarter (28%) of respondents felt that an external whistleblowing helpline was the most appropriate channel of communication. The question of with whom complaints should be raised is of increasing prominence and the role of the whistleblower and the provision of appropriate supporting mechanisms is a key factor. However, in this situation, beyond Gavin's concern that he was involved, reporting internally as a first step should be the preferred option and is in fact what is recommended in many publications on whistleblowing policy. However, any policy which requires individuals to report situations which are of concern to them, will only be successful and sustainable, if 'whistleblowers' are assured that they will not face any form of retaliation and this applies equally to internal as well as external whistleblowing. === Title: Speak Up dilemma: In a hole - the verdict StandFirst: An invitation from a client to attend the Ryder Cup golf tournament appears to have unduly swayed a sales colleague to favour the firm. How would you react? PublicBody: Hannah works for the sales team for 'Max Bank'. Dylan also works in the sales team, and both Hannah and Dylan are at the same level and share the same line manager. Dylan has been at Max Bank two years longer than Hannah, and even though she started just over a year ago, she is still the newest member of the team. PrivateBody: Hannah works for the sales team for 'Max Bank'. Dylan also works in the sales team, and both Hannah and Dylan are at the same level and share the same line manager. Dylan has been at Max Bank two years longer than Hannah, and even though she started just over a year ago, she is still the newest member of the team. The team is close-knit with staff tending to look out for one another, and this supportive culture and positive working attitude has been praised by senior management at Max Bank. Dylan is particularly popular, with his peers as well as senior management. When Hannah joined the firm, he took the time to help her learn the ropes and to make her feel included. As a result, Hannah and Dylan formed a close friendship and she looks up to him and values his advice. The sales team socialises together frequently, and Hannah and Dylan also regularly spend time together outside of work hours without the rest of their colleagues. Extravagant hospitalityOne evening, Hannah is invited to a dinner party at Dylan's house. There are about 15 people there, but she is the only person from Max Bank to have been invited. After dinner, the guests are talking around the table and Dylan brags to everyone that he has been invited to attend the Ryder Cup golf tournament at the invitation of a potential client. Dylan and a couple of his friends are keen golfers, and start talking excitedly about his trip. Hannah hears a few snippets of the details which sound fairly extravagant – including an opportunity to meet some of the professionals who will be playing at the tournament at a dinner which will be laid on by the client - but she is not a fan of the sport and drifts away from conversation to talk to some of the other guests. Hannah overhears Dylan promising to pay large commissions to a new client A couple of weeks pass, during which Hannah does not give any more thought to the conversation at the dinner party. Dylan has a day out of the office, which Hannah assumes is to attend the event, but he doesn't bring it up again and Hannah doesn't think to ask him about it as, not being a golf enthusiast, she isn't that interested in hearing how it went. However, one day Hannah passes Dylan's office, and overhears him on the phone promising to pay large commissions to a new client. Her thoughts immediately turn to the client who organised the Ryder Cup event, and she becomes even more concerned when Dylan says: "Don't worry, I took the day as holiday, so my boss won't even know where I was". Hannah makes a hasty retreat before Dylan's conversation ends as she doesn't want him to think she was eavesdropping, but as the day goes on Hannah starts to feel more and more worried about what she overheard and reflects on the options available to her. The CISI verdictThis dilemma was published in the Review digital edition, with members invited to register their favoured response from four options and leave supporting comments in a survey on the CISI website. Of the 85 respondents, most were sensitive to the fact that the dilemma for Hannah is that her friendship with Dylan has exposed her to a conflict of interest and loyalty. Although many (27%) of respondents recommended that Hannah confront Dylan directly, a majority agreed that Hannah should report her concerns, either to her manager (27%) or through the company's whistleblowing hotline (28%). This scenario demonstrates that taking action requires moral courage, especially when personal friendships and team relationships are at stake. So it is encouraging that no one felt that it was acceptable for Hannah simply to ignore the matter. Some respondents commented that they felt that Dylan was "clearly up to something" and that loyalty to the firm must surpass friendship in such situations. Indeed, if Hannah's suspicions are correct, Dylan has been influenced by the hospitality offered by a potential client. And he may also have failed to declare the hospitality to Max Bank. Allegations of bribery could have serious implications for Dylan and the firm, and Hannah needs to have the courage to take action at this stage and allow management to rectify the problem. Respondents commented that reporting to line management was appropriate in the first instance. But, if Hannah did not feel comfortable doing this, it was suggested that she "confide in another manager that she feels able to discuss this subject with". For many, whistleblowing was seen as the "next step" in the process, which is in line with the CISI four-stage 'Speak Up' process. The Institute's view is that Hannah should give her manager the opportunity to take action, and to call the whistleblowing hotline only in the event that her manager does nothing. At this stage, there is only a suspicion of wrongdoing and further investigation by management followed up by appropriate corrective, possibly disciplinary, action would be proportionate. Nevertheless, if Dylan's popularity in the team and good relationship with his line manager means that management don't take any action, calling the whistleblowing hotline is an appropriate next step for Hannah. === Title: Grey Matters dilemma: Shock and awe StandFirst: A new manager is determined to improve the performance of his department. Should his wish to make an example of one erring employee be granted by the divisional head? PublicBody: Richard is the new head of an operations department, where a poor reputation has led senior management to focus increasingly on the area. He is renowned as being a demanding manager, some would say ruthless, and the department views his appointment with some trepidation. On his first day, Richard calls the section heads into his office and tells them he is determined to improve the performance of the department, which means the elimination of the unacceptable number of errors that occur. He tells the section heads that they have a key role in driving the performance of their teams and thus his department, adding that he is aware of his reputation, which he admits is not undeserved. PrivateBody: Richard is the new head of an operations department, where a poor reputation has led senior management to focus increasingly on the area. He is renowned as being a demanding manager, some would say ruthless, and the department views his appointment with some trepidation. On his first day, Richard calls the section heads into his office and tells them he is determined to improve the performance of the department, which means the elimination of the unacceptable number of errors that occur. He tells the section heads that they have a key role in driving the performance of their teams and thus his department, adding that he is aware of his reputation, which he admits is not undeserved. After a week in his new role, Richard again summons the section heads into his office and draws their attention to the weekly errors report, which, far from showing an improving trend, shows more mistakes than ever before. He then reads out the text of a letter that he intends to send to all staff in the department, informing them that if all work is not checked, and the failure results in unacceptable errors, "it is highly likely that the individual… may face disciplinary action, which could result in dismissal." The new regime will be enforced immediately. The impact of the letter is a sepulchral hush in the office and the working of longer hours by many of the staff, especially the section heads. Snap auditA week later, unprompted by Richard's ultimatum, the internal audit team carries out a snap audit of the department, as a result of which it identifies a number of errors, most of which are historic. However, Richard's attention is drawn to one specific item, which relates to an issue which is still current and includes entries made two days previously.This item concerns automated dividend payments into a client's account, where the original instruction has been wrongly set up, resulting in a series of duplicated dividend payments being made to the client. Richard demands that disciplinary action be taken to follow through on his warningAlthough none of the amounts is more than £25 and the total payments amount to about £200 being wrongly paid to the customer over a period, it is the apparent failure of his letter to make any difference which really upsets Richard. Exasperated that this should have occurred so recently, Richard asks who should have checked the entries and is told that it is Nadia, a longer-serving section head. Nadia has been in her position for a number of years, and has a mixed track record. With a copy of his letter and the internal audit findings in his hand, Richard storms into the office of his Divisional Head. He demands that disciplinary action be taken to follow through on his warning, saying that he expects the Divisional Head's support, as this will be crucial in achieving the joint objective of an effective department. The Divisional Head has a meeting scheduled imminently and so tells Richard that he will meet later in the day. Before doing so, he runs through in his mind a number of key issues that need to be addressed before making a decision. Foremost is a need for any action that is contemplated to be fair and scrupulously to follow the firm's procedures but, bearing that in mind: Whats sort of culture does the firm want? When is it appropriate for zero tolerance to mean zero tolerance? Does the operational failure meet this criterion? Do you want people to own up when they have erred? If so, how do you incentivise and encourage them to do so? Do you want to reward appropriate behaviour? How can you do so in this case? How might Richard feel if his Divisional Head does not support him? Should you weigh the materiality of Nadia's failure against the potential impact on the authority of your new manager? If he thinks disciplinary action is warranted, which might lead to dismissal, what would Nadia need to have done to avoid being dismissed? Where would he draw the line and what message does this send to other colleagues? Having considered these questions, the Divisional Head determines that he has a number of potential courses of action, all of which have some merit, and wonders which one to choose. Should he: Support Richard in his proposed course of action, to the maximum extent that it is permitted within the firm's employment policies, because he was selected to do a job and failure to support him at this stage will fatally undermine his authority? Support Richard in taking action, but ensure that it is proportionate to the actual incident, irrespective of the warning that he had sent out? Suggest that no action should be taken without involving HR in the decision, even if that results in losing the 'shock and awe' impact for which Richard clearly hopes. Suggest that no action should be contemplated that might have unintended consequences? Consideration must be given as to whether a hard line now will make matters worse or better. What would you advise the Divisional Head to do? === Title: Grey matters ethical dilemma: Brought to account – the CISI verdict StandFirst: A research partner in a boutique advisory firm finds herself facing a difficult decision. A major client's planned flotation looks overvalued – but no one will listen to her PublicBody: John has spent most of his working life in the City of London. He now fills a number of non-executive roles, but for 20 years before he stopped full-time work, he was a senior director of an investment bank. Recently, he was surprised to receive an email out of the blue from Jean, asking if he could meet up for 30 minutes. Jean, whom he had not seen for several years, had been an analyst who had worked in the Mergers & Acquisitions team in his old bank and he had also known her as a college friend of his daughter. PrivateBody: John has spent most of his working life in the City of London. He now fills a number of non-executive roles, but for 20 years before he stopped full-time work, he was a senior director of an investment bank. Recently, he was surprised to receive an email out of the blue from Jean, asking if he could meet up for 30 minutes. Jean, whom he had not seen for several years, had been an analyst who had worked in the Mergers & Acquisitions team in his old bank and he had also known her as a college friend of his daughter. Jean explained that about 12 months ago, she had left the bank to join a boutique advisory firm, where she is the research partner. The firm is currently working on bringing to market a new client, and success in this transaction is crucial if it is to have any credibility. The client was an outsourcer that specialised in taking routine clerical tasks, in both the private and public sectors, applying its skills in organisational and operational management to re-engineer and automate, reducing costs by labour saving and relocating to lower-cost regions or overseas. Standard contracts generally ran for ten years, and the client's business model involved high costs in the first few years, as jobs were reorganised and/or new equipment was bought. On a strict comparison of costs and profits, new contracts were generally unprofitable for the first three or four years, then substantial – often indecent – margins could be made in later years. As the client was growing rapidly, the number of loss-making contracts was on this basis much greater than the profitable ones. All six partners had borrowed heavily to set up their firm and success for the client is crucialJean went on to explain that, despite this, the client's accounts showed relatively large and rapidly growing earnings. The key to this apparent anomaly was that the client capitalised not only assets but also a proportion – in her view, too high a proportion – of actual running costs. The accounts were not sufficiently transparent. Effectively, profit was being recognised too early, and the client was dependent to a greater degree than outsiders might appreciate on a rapidly growing stream of new business and future cost saving, which was not yet certain. Jean had looked at this in considerable detail and was quite quickly able to satisfy John that her concerns were justified, and that the anticipated share price on launch was not sustainable if the market were aware of the practices that Jean described. Jean said that the client's management was controlled by three strong individuals: the chairman, the chief executive, and the chief financial officer (CFO). The three had worked together in a large multinational and had built the business originally with a private equity house over a good number of years. Each of them had a major financial commitment to it, and all, including the chairman, would benefit significantly from a successful flotation. Jean had raised her concerns with the CFO, who had initially taken steps to persuade her that she was wrong, but increasingly was showing clearly that he and his two senior colleagues regarded Jean's attitude as one of disloyalty and had begun to question her commitment and, more worryingly, whether they had perhaps made a mistake in choosing her firm. Jean had discussed the accounting treatment with the client's auditors, an ambitious, mid-sized firm that had grown rapidly, in good part stimulated by the growth of the client. The audit partner said he understood Jean's concern but that the matter was one of interpretation. The client had always delivered in the past, and he saw no reason to challenge the current position. The chair of the client's audit committee, also the senior independent director, is senior partner of the client's long-standing and quite small firm of solicitors. Jean had tried to raise the subject with him and had received little better than a brush-off. Jean told John that she had followed the client for some time and was confident that her analysis was sound. Although she had shared her concerns with one of her partners, who is the sponsor of the issue, he had said that he was confident in relying on the client's audited accounts and the assurances of the firm's executive that its accounting treatments and projections were all soundly based. Jean feels that she is in a difficult position. All six of the partners in the boutique, in order to set up the firm, had borrowed heavily to fund the business until it became established, and so success with the client transaction is crucial to all of them. Jean is perhaps fortunate in that she has no dependants beyond herself and her husband, while she is aware that her partners all have children and significant external commitments, such as school fees and large mortgages, to meet on a regular basis. Consequently, she feels reluctant to make too big a fuss, although her real inclination is to say that she feels that the risk involved in continuing with the client flotation is too great for the boutique. John offers Jean a number of possible courses of action to discuss with her partners/the client to help remediate the position, but says that at the end of the day, Jean may be faced with deciding that she: should accept that the accounting treatments in question are an art not a science and that having raised her concerns, she should allow the flotation to continue should seek to persuade the sponsoring partner of her concerns, and if he remains unreceptive, should insist that the matter is aired with all the partners has no credible option other than immediate resignation must immediately report the matter to both the accounting regulatory authorities and the FCA. The CISI verdict The dilemma was published in the Review digital edition, with members invited to register their favoured response from the above four options and leave supporting comments in a survey on the CISI website. This was not one of the more popular dilemmas, possibly indicative of lower levels of interest in corporate finance matters, albeit that the type of dilemma illustrated is one that practitioners will be familiar with: a conflict between the need for valuable fees and personal integrity. Interestingly, no one felt that the issue was an immediate resigning matter, with the great majority of respondents (84%) supporting the view that Jean should seek to persuade the sponsoring partner of her concerns, failing which she should insist that the matter is raised with all the partners. This is the CISI's preferred option. A number of readers felt that the matter should be reported immediately to both the accounting and financial regulators. While this may be considered a 'safety first' action, it does expose all of the partners to the risk of damaging action by one or possibly both regulators, without giving Jean's fellow partners the opportunity to take remedial action. Accordingly, it would represent a last resort, rather than first action. There was only one vote for allowing the float to continue on the basis that accounting treatments are an art, not a science. This was possibly from a reader who is a supporter of the John Cleese school of accountancy, or more recently, the Autonomy/Hewlett Packard debacle! === Title: Grey matters ethical dilemma: Unexpected rewards – the verdict StandFirst: A new bank loyalty scheme has wrongly credited millions of travel miles. Staff have taken advantage. What should the bank do? PublicBody: Fran is a senior member of the team in her bank which works on providing a 'reward programme' to account holders who meet various levels of activity on their bank account and related credit cards. She has recently been responsible for introducing a new reward scheme to her bank customers, in partnership with a well-known airlines group. Shortly after the fanfare of the launch it transpires that the amount being credited to customers' loyalty reward accounts has been wrongly programmed by a factor of 100. As a result, millions of travel miles have been wrongly credited to account holders. PrivateBody: Fran is a senior member of the team in her bank which works on providing a 'reward programme' to account holders who meet various levels of activity on their bank account and related credit cards. She has recently been responsible for introducing a new reward scheme to her bank customers, in partnership with a well-known airlines group. Shortly after the fanfare of the launch it transpires that the amount being credited to customers' loyalty reward accounts has been wrongly programmed by a factor of 100. As a result, millions of travel miles have been wrongly credited to account holders. News of this has spread like wildfire, particularly within the bank, where a number of members of staff appear to have taken advantage of the error to book extensive and expensive overseas travel. The cost to the bank and the airline of honouring all of these unearned 'miles' could run into many millions of pounds. As soon as Fran is made aware of the problem, she contacts the administrator of the scheme, who quite quickly identifies a 'computer operator error' as the cause and asks Fran what they should do. The amount being credited to loyalty reward accounts has been wrongly programmed Fran feels that she must lose no time in informing her superiors of the problems with the incentive programme but that she must offer them solutions to the problem at the same time. Fran suggests to the administrator that they suspend the scheme immediately, but is told that they could only accept such an instruction in compliance with the terms of their contract with the bank. Accordingly Fran would have to get the agreement of a senior executive of her bank to amend the contract. Knowing that she will be unable to avoid raising the matter at the highest level in her bank, Fran considers some recommendations on how to proceed. Recognising that there are a number of parties involved, including customer, bank and reward provider, she feels that any recommendation that she makes must take each of them into account. Start againHer initial thought is that the most straightforward course of action would be to cancel the scheme and start again, crediting everyone with the correct miles. Unfortunately, when investigating who within the bank had used the reward scheme, Fran is surprised to see her own boss, a number of other senior executives and even two directors. Accordingly, she feels that she had no alternative other than to report the matter directly to the Chief Executive. The Chief Executive has already been made aware of the problem by his opposite number at the airline and thanks Fran for bringing him the details. However, on reading the list of names, his immediate response is to ask his PA whether the Chairman is in the office, as he must see him immediately. Taking Fran with him, he hastens to the Chairman's office. The Chairman listens with increasing dismay as the CEO recounts what has happened and the potential cost. He is even more concerned to hear the names of those bank personnel who have taken advantage of what was, manifestly, a mistake. In his anger, his initial response is to suggest that the bank should dismiss all those staff who have taken advantage of the mistake. At this, the CEO interjects and says that he thinks that might cause more problems than it solves and so offers the Chairman a number of potential ways forward: • Offer all staff the chance to reimburse the bank for the equivalent value to the travel booked using the rewards. • Tell staff that their actions have breached their responsibilities to their employer who will take disciplinary action against them, commensurate with the seniority of the member of staff. • Dismiss all those staff involved, irrespective of the impact that it may have on the operations of the bank, on the basis that their behaviour amounts to dishonesty. • Accept that the bank was partly responsible and offer to share the cost of any use made of the Rewards with the individual concerned. The CISI verdict The dilemma revolved around what might be an appropriate response for the bank to take towards those of its staff who had taken advantage of the error and used the unearned rewards. The main events of the dilemma were based upon an actual event that took place in a foreign country, and so the responses of readers were more than usually interesting. This is particularly the case in as much as three quarters of those who responded, did so in equal measure, but were divided into entirely different camps: Answer A, which might be thought of as the 'emollient response', saw the bank offer staff the chance to reimburse it for the value of the travel booked. This attracted 37% of respondents. Answer B was diametrically opposite, in that it took a hard line, saying that staff had breached their responsibilities to the bank and would be subject to disciplinary action. This also attracted 37% of the vote. Answer C, which supported dismissal for all of those involved, garnered only 4% of the vote; and Answer D, where the bank accepted a share of the blame and offered to split the cost of the rewards used with the staff member concerned, attracted 22% of respondents. In reality, a number of the options posed might be viewed as appropriate, depending upon the actions of the staff involved and their apparent motivation. Since the error was not of the customers' making, Answer D does seem appropriate. Answer A also has merit, although it does leave open the question of the integrity of staff who took advantage of what was, fairly obviously, an error. This then leads to Answer B. If you believe that staff knowingly took advantage of an obvious error, then why would disciplinary action not be obvious, unless it would undermine the operational effectiveness of the bank? The significant issue in this, as with other decisions of this nature, is that what is deemed to be the 'right' answer in the circumstances will depend upon the culture of your firm and the message that you are sending. This article appears in the June print edition of the Review. The results of the survey and the opinion of the CISI appear in the September 2015 print edition of the Review. === Title: Grey matters ethical dilemma: Questionable coffee – the verdict StandFirst: Ten minutes before the launch of a high-profile event promoting ethical investment, you discover that the venue serves an unethical brand of coffee. As Head of Marketing, you are responsible. What do you do? Read the CISI's verdict PublicBody: You are Head of Marketing for an investment firm. In response to growing demand in the market for ethical investments, the firm is launching a new investment initiative, called 'Invest in Good' which allows customers to invest in ethical projects. The projects are all certified as having no involvement with the tobacco, pornography, arms or gambling industries, nor using supply chains involving child labour or using loopholes to avoid tax. The firm has built up a sizeable PR campaign around 'Invest in Good'. It is seen as a positive step within an industry which is trying to turn its reputation around, and senior leaders within the firm think that launching this initiative will be an excellent way to win back customer trust and position your firm as an industry leader in ethical investments. PrivateBody: You are Head of Marketing for an investment firm. In response to growing demand in the market for ethical investments, the firm is launching a new investment initiative, called 'Invest in Good' which allows customers to invest in ethical projects. The projects are all 'certified' as having no involvement with the tobacco, pornography, arms or gambling industries, nor using supply chains involving child labour or using loopholes to avoid tax. The firm has built up a sizeable PR campaign around 'Invest in Good'. It is seen as a positive step within an industry which is trying to turn its reputation around, and senior leaders within the firm think that launching this initiative will be an excellent way to win back customer trust and position your firm as an industry leader in ethical investments. Your marketing team has organised a high-profile launch event for 'Invest in Good'. You have invited around 250 people – a mixture of existing and potential customers (many of whom have expressed an interest in ethical investments in the past), VIPs and about 20 members of the press. The journalists are from a mix of high-profile national papers and trade journals, as well as a number of specialist independent ethics bloggers whose blogs have large numbers of subscribers. The venue uses branded coffee, provided by a supply chain which has been in the media recently for avoiding tax The venue which your firm normally uses is not large enough to host this number of guests, so your team have booked a larger venue near to your office. It's an impressive meeting space which is guaranteed to make an impact. As your firm has not used the venue before, and the event is much larger than the ones your team usually organise, you have decided personally to take charge of the event on the day. On the morning of the launch event, you arrive at the venue and are kept busy overseeing the distribution of promotional material, setting up the presentation and sorting out last-minute problems. As a result, you do not get around to checking the reception area until the last minute. When you do manage to find the time to do a final check, you discover that the venue uses branded coffee, provided by a supply chain which has been in the media recently for avoiding tax. In fact, there is a rally in London this week protesting against this particular chain. The coffee and tea refreshments have already been paid for, and have been laid out in reception ready for your guests. Branding of the coffee chain is clearly visible – all the mugs, carafes, tea labels and even the box the tea is laid out in are stamped with the logo. Guest registration for the event starts in ten minutes. You identify four possible courses of action. Which do you choose? Get the venue to replace all the branded cups with plain ones, pour the coffee into plain carafes and cut the labels off the tea bags, but still use the tea and coffee. Rush out to the nearest shop and buy Fairtrade tea and coffee. Get the venue to replace what they have already set out with the Fairtrade products. Put a sign up that all of the tea and coffee used is certified Fairtrade. Print out a petition page which says "Enjoy this coffee? Sign this petition to ensure the company who supplies it pays their tax" and tell your guests you will supply the petition to the group arranging the rally later in the week. Hope that no-one will notice. If someone does complain, you will simply explain to them that the refreshments were provided by the venue, and that you were not given a choice over the supplier. The CISI verdictThe dilemma was published in the Review digital edition, with members invited to register their favoured response from the four options and leave supporting comments in a survey on the CISI website. Unfortunately, no respondents commented on the dilemma, so the thought processes which went into choosing one option over the other are not obvious. However, some deductions are set out below: Over half the respondents (57%) chose to replace the refreshments with Fairtrade products from the nearest shop. This option reflects a common 'gut-reaction' that many of us might have – to quickly replace the offending products with something more acceptable. However, this is the only option which actually involves throwing away the tea and coffee and creating waste, which in itself is not a very environmentally conscious approach. Additionally, buying Fairtrade is something of a red herring, as there was nothing to suggest that the products which were already set out were not Fairtrade. The issue here centres on whether or not your company will associate itself with a supplier that avoids tax – something which is against the ethos of your 'Invest in Good' product – not whether or not the refreshments provided carry the Fairtrade logo. Although recent research by the Institute of Business Ethics suggests that corporate tax avoidance is the number one issue that the public wants companies to address, it has also been suggested that this might not have much actual impact on consumer spending. A Financial Times article published in June this year noted that while it is easy for disgruntled consumers to steer clear of coffee shops that offend them, for most people the taste of the coffee and convenience are more important factors. Accordingly, option D (hope that no-one will notice) is not, in fact, such an unreasonable approach – even though only 6% of respondents voted for this option. Nevertheless, it would still be prudent to address the issue rather than just ignore it, given the context of the event. The only option which actually provides both the host and the delegates with an opportunity to be the force for change (which is what the event is about) is option C – which a third of respondents (33%) voted for. Providing a petition for your guests to sign does draw attention to the fact that the coffee they are drinking has been supplied by a company which does not pay its fair share of tax but, considering your guests are attending the event because they share the aims of your new product, they may appreciate being given the opportunity to voice their opinion. A petition by investors encouraging the company to change its ways could have a bigger impact than merely avoiding their products which, in this case, you have already purchased. Accordingly, Option C is the CISI preferred option in this scenario. Conversely, the option which could be considered to be the worst of the four available is option A, which only 3% of respondents voted for. Removing the branding from the products may be a quick and easy fix, however, it is also the option which is the least honest, open and transparent. CISI's latest 'Grey matters' has been published in the September edition of the Review, both in print and online, and we should be pleased to receive your comments in support of the course of action which you chose. === Title: Grey matters ethical dilemma: In a jam – the verdict StandFirst: Javid needs to process a transaction that is above the amount he is allowed to approve. His supervisor is not around but provides her login details so Javid can complete the transaction himself. Following this, what might he do? PublicBody: Javid works at FAIRLY, in a busy operations department handling foreign exchange settlement transactions. The department is under pressure because of the volume of work, which has also resulted in some technical system issues. This has, in turn, increased the number of 'exceptions' that require manual processing, putting further pressure on the team. Javid is one of five junior staff members in a team that is supervised by Claire, who reports to a 'middle manager', Colin. Fed up with the increased workload, Colin has given notice to leave FAIRLY, and there is no obvious replacement from within the existing team, which already needs more staff in order to maintain the level of service required and avoid expensive mistakes occurring. The team, including Colin and his replacement, when appointed, is managed by Delores – an experienced manager. Each of the junior staff members can approve transactions up to £500,000 without sign off by a more senior manager, but all transactions larger than this must have four eyes sign off, which must include approval by Claire, Colin or Delores. Since Colin handed in his notice, although effectively he still has more authority than Claire, Delores has decided that she and Claire should approve the majority of the transactions between the two of them, which has made it a challenge to achieve the deadlines for processing the day's work. Javid receives a phone call from Claire, saying she will not be in the office until 10.30am In Colin's final week, with his replacement not due to start until after he has left, Delores is on annual leave, enjoying a long-planned overseas trip to visit her family. Although a new junior team member has been brought in to help with the processing, they are not able to act as a second signatory, and so that responsibility rests with Claire and Colin, who increasingly seems reluctant to put himself out for FAIRLY and his colleagues. On Thursday morning, the day's work contains a payment exception requiring manual processing of a payment for €100m on behalf of a major client to pay its associated company in Italy. For it to receive the required same-day settlement, it must be authorised by 11am. Shortly after 9am, Javid receives an anxious phone call from Claire, saying that her son has been ill during the night, and so she cannot send him to school. She has arranged a babysitter, but unfortunately the babysitter cannot reach her until 9.15am, which means that Claire cannot reach the office until 10.30am. She checks with Javid regarding any urgent items that might be outstanding, expressing particular concern about the €100m payment. She suggests to Javid that he should get Colin to authorise the payment if she does not reach the office in time. Colin, having been in the office earlier on, is now nowhere to be seen. Time passes and Javid waits anxiously for Claire to appear. In the meantime, Colin shows up and Javid approaches him regarding authorisation, but Colin tells Javid that he should get Claire to authorise the large payment and then disappears again. At 10.45am, Claire phones Javid again, saying that she is stuck in traffic that has not moved for 20 minutes, and she asks him whether the payment has gone through. He explains that he cannot get Colin to authorise it, and with Delores being away, there is no obvious person available whom he can approach. Claire is very concerned about this and tells Javid that she will give him her login details which will enable him to add her 'authorisation' to the payment, since failure to make the payment will have serious repercussions for the firm and for both herself and Javid. Colin clearly does not care and Delores, being on holiday, can hardly be blamed. Javid is uncertain about the propriety of what Claire has told him to do, but goes ahead anyway and the payment is made. Failure to make the payment will have serious repercussions for the firm and for both Claire and JavidShortly after midday, Claire arrives at the office and expresses relief that the payment has been made. However, she also suggests that she and Javid must now consider what further action, if any, they should take. Javid, relieved that what could have been a major problem has been averted, is taken aback by this and suggests four possible options. The CISI verdictDecember's dilemma concerned a situation in which many of us may find ourselves on occasion: what should we do when designated chains of command are broken? When is it appropriate to take a decision ourselves and when should we refer upwards? In this instance, a transaction sanctioning line was broken by holiday absence and travel delays, compounded by a lack of co-operation from a designated person, who was leaving the firm, which raises other issues. The 68 readers who voted had four options to choose from. Javid, the junior person involved in the dilemma, should: A. Report the matter when Delores (line manager) returns from holiday on Monday (18% = 12 votes). B. Do nothing. The payment has been made with the necessary authorisations, albeit one of them was obtained in an irregular manner (3% = 2 votes). C. Escalate the matter, although conscious that it may result in criticism of your colleagues (71% = 48 votes). D. Let Claire (the supervisor) handle it; it is her problem. Javid is only doing what he is told (9% = 6 votes). Although the majority vote in favour of escalation is quite clear, it does mean that 20 people voted not to escalate the matter and essentially keep the problem within the team. Our view is that this is definitely a situation where honesty, openness, transparency and fairness are paramount and there is no merit in trying to keep the problem within the team. This dilemma appears in the December print edition of the S&IR. The results of the survey and the opinion of the CISI also appear in the March 2015 print edition of the Securities & Investment Review. PrivateBody: === Title: Grey matters ethical dilemma: Wine and dine – the verdict StandFirst: CEO Harriet must decide what the correct protocol is when a supplier repeatedly tries to give a personal gift against company policy. Read the CISI's verdict PublicBody: Harriet is the CEO of a small wealth management firm with about 100 staff members. The company has a gifts policy in place which states that all gifts received must be declared to the HR manager. Items of low value or items that have been personalised or engraved (such as pens or calendars) may be kept after being declared. Additionally, gifts may be kept if they have been given as a result of a personal connection or relationship – but this is subject to Harriet's discretion. Otherwise, all gifts are held by HR and staff members are given the chance to enter a raffle and win one of the gifts on the day before the office closes for the Christmas break. One of the firm's suppliers is a small, privately owned printing company, Rainbow, to whom the firm has sent all of its printing for a number of years, and where Harriet has a friendly relationship with its Managing Director, Herman. In early December, a package arrives from Rainbow containing six bottles of wine, with a generic note saying: "Thank you for being such a great customer this year. We hope that your staff members enjoy this contribution to your Christmas gift raffle." This is not unusual – Rainbow has sent the same gift for the past two years in a row – and the package is given to HR to be declared and added to the collection of other gifts received throughout the year. Persistent presents However, a week later another package arrives from Rainbow, addressed personally to Harriet. This is a bottle of wine, which Harriet knows is more expensive than the wine already received. It is accompanied by a slightly cryptic note from Herman to Harriet: "I know your policy is to share gifts between your employees at Christmas, but I did not want you to feel left out." Harriet sends this gift to HR to be added to the Christmas raffle and sends a polite note back to Herman thanking him for the wine, saying she is glad that he has enjoyed working with her, but that she is sure that Herman will understand that she cannot ignore the firm's rules just because she is the boss. A week or so after returning to work following the Christmas break, Harriet receives an email from Herman inviting her to lunch with him in a few days' time. Harriet is happy to accept as it does not appear that Herman has taken offence over the note she sent to him regarding the bottle of wine. Herman says that he will meet Harriet at her office and they can go on to the restaurant together. As arranged, Herman calls for Harriet at her office, and tells Harriet that he has booked a table at a well-known restaurant, just a short walk away. Harriet has not been there before as it is considerably more expensive than she would normally choose for a business lunch. Nevertheless, she enjoys a convivial lunch with Herman, whom she is able to reassure that the firm has no current plans to change its suppliers and they part on good terms. A few days later, Harriet arrives home late after attending an evening function and is greeted by her partner who says that they have received a package, which she opens to discover two bottles of rather good claret in a very nice presentation box. There was a note from Herman, which said simply: "Enjoy!" Slightly irked by the prospect of having to lug the heavy box in to work at a time when she is very busy, Harriet thinks no more about it and goes to bed. With Harriet's heavy schedule, the matter of the wine slips from her mind until a few weeks later when preparing for a dinner party. Her partner says that he has opened the wine that Herman sent as it looks rather good. On hearing this, Harriet sighs, remembering that she had meant to take the wine in to work and give it to HR to hold until Christmas. Clearly this is no longer an option. The CISI verdictGratifyingly, 88 readers responded to this dilemma, which revolved around Harriet, the Managing Director of a small firm, receiving at home a gift of expensive wine from a business contact, and her failure to follow her own firm's procedures. Bearing in mind the circumstances, it also called into question the motivation of the person giving the gift. The giving and receiving of gifts at particular times of the year is something that goes on around the world and so it would be very easy to take the view that "it's just a couple of bottles of wine" (option A), which is what a small number of readers did. This ignores the fact that the Managing Director would consciously have been flouting her own policies. A slightly larger number of readers voted for option B (contribute value of wine to staff Christmas fund), which is appropriate in so far as Harriet has recognised that she cannot flout her own firm's policies, but does ignore the motivation of Herman, who gave her the wine, despite being aware of the firm's policy on gifts. So it really only deals with half of the problem. Responses C (review dealings with Herman) and D (write to him), the choices of the majority of readers, acknowledge that Herman's actions were questionable and that he seemed to be blending a personal and a professional relationship. While there are many situations where this is inevitable, it should not be taken advantage of, therefore Herman appears to have crossed a line. Accordingly, it is sensible that Harriet should write to him from the office to make him aware of this. Consequently, we consider that D represents the most appropriate course of action, while neither B nor C are wrong in themselves. This dilemma appeared in the March print edition of the Securities & Investment Review (S&IR). The results of the survey and the opinion of the CISI will also appear in the July 2016 print edition of The Review. PrivateBody: === Title: A dilemma for financial planners: what would you do? – the verdict StandFirst: Terry, who has been working at a firm for a number of years, has lied about graduating from university. He is an integral part of the team and the firm has made a mistake by not checking Terry's credentials. What do you do? Read the CISI's verdict PublicBody: In this scenario you are a partner in a financial planning practice. You have employed Terry as a paraplanner for a number of years, having joined your firm after attending university. He has since achieved Accredited ParaplannerTM status. Terry is an int PrivateBody: === Title: Grey matters ethical dilemma: Fat finger – the verdict StandFirst: A report sent to the regulator is misleading about how phased changes will be implemented. Vikram, a member of the working group responsible for those changes, becomes aware that the report is factually incorrect. What should Vikram do? Read the CISI's verdict PublicBody: Toby works as a fund manager for a mid-size firm of asset managers which has been the subject of a recent regulatory visit. A number of procedural weaknesses in the firm's processes were identified. The principal one in which Toby was involved related to the fact that fund managers were permitted to initiate, book and execute their own trades. In response to this criticism, Toby and his fellow managers said that they were not responsible for introducing the system; they were merely following the firm's procedures. Accordingly, if the firm wanted them to do something else, it should tell them what to do. However, it all seemed a bit of a storm in a teacup as it had not given rise to any problems. Nevertheless, the firm undertook to the regulator that it would modify its procedures. Shortly after having provided this reassurance to the regulator, one of Toby's colleagues initiated a trade to buy Norwegian Government warrants, but accidentally placed an order for ten times the required value. With the unaltered system still in operation, this was not picked up immediately, coming to light only when it was queried by the settlements team because it was outside the normal run of transactions. Implementing change This failure was reported to the regulator, which insisted upon an urgent skilled person's review of the firm's systems, with an early date for remedial action to prevent similar and potentially more destructive events. The firm was given a deadline for the implementation of these changes and told to report these to the regulator. In response to this requirement, the firm set up a working group with representatives of all those areas affected by the regulator's requirements. Toby was somewhat irked to be nominated to represent his area. Over the following weeks a number of meetings were held and new end-to-end processes were designed. Some parts of these were put in place, although it was felt that the introduction of the complete package should be phased in to ensure that the individual stages were working effectively. Meanwhile, a report was written for submission to the regulator, having been signed off by the head of compliance and the chief executive. This was circulated to the working group only after having been sent to the regulator. Toby read it and was alarmed by statements that a number of new procedures had been introduced, which was not the case, as they were a part of the phased introduction which had not yet occurred. He raised this in the working group, from which he received a variety of responses, ranging from "we must do something – can we get the letter back", to "we didn't sign the letter so it's not our problem", together with a variety of more considered comments. The upshot of the meeting was that Toby should convey the group's concerns to the head of compliance. He had no intention of telling the CEO that he had been induced to sign a letter to the regulator making untrue statementsToby met the head of compliance and told him of the working group's concern that the letter sent to the regulator was factually incorrect, since it stated as fact that processes had been put in place which, although they had been designed, had not yet been implemented. The head of compliance responded that, personally, he was quite relaxed about this, saying that it was really only an issue of timing, and that during the next few weeks the statement would become fact. Accordingly, he had no intention of telling the CEO that he had been induced to sign a letter to the regulator making untrue statements. Having been told effectively to mind his own business, Toby's initial reaction was to let the matter drop. But he communicated the view of the head of compliance to the working group, from which the consensus was that further action was now outside its remit, because the group existed to ensure smooth introduction of the new processes. Toby was unsettled by what he knew had taken place, and while he was not happy about it, he felt that because of the seniority of those involved, it was really out of his hands. After all, the CEO must have known what he was doing and besides, introduction of the new processes was occupying his every waking minute. A short while later, Vikram, a fellow working group member, came to see Toby and told him of his discomfort at being aware of the position of the firm, should the regulator discover that it had been misled and that staff knew about this. Surely they all had a responsibility to be honest, but he was in a quandary as to what, if anything, he could do without being implicated. Vikram's concerns echoed those of Toby himself, who had tried to identify some plausible actions. He set these out for Vikram. The CISI verdictReaders were offered four choices: A. Let matters take their course. Undermining senior executives, especially the CEO, would be career suicide. Anyway, the new processes will soon be up and running and the problem will disappear (0%). B. Arrange to speak to the CEO and tell him what has happened (42%). C. Arrange to speak to the firm's senior independent non-executive director (NED) (19%). D. Use the firm's Speak Up telephone line (40%). No one chose to take no action, which is positive although, as always, I do wonder whether if faced with such a situation in 'real life', some of us might not actually feel that keeping one's head down is the most sensible action to take. By a small margin, speaking to the CEO was the most popular course of action. This is a situation which is in the CEO's line of responsibility and he needs to know from Toby, as a figure directly involved, what has happened. Speaking to the firm's senior NED would be appropriate if the CEO does nothing, but he should be given the opportunity to take action first of all. Using the firm's Speak Up line was only marginally less popular than speaking to the CEO and it does represent a defensible course of action. However, we feel that as this is a matter which needs to be dealt with as a priority and involves the CEO, making him aware of it as soon as possible is the most appropriate course of action, notwithstanding that one might be fearful of the consequences. This dilemma appeared in the July print edition of The Review. The results of the survey and the opinion of the CISI also appear in the September 2016 print edition of The Review. PrivateBody: === Title: Grey matters ethical dilemma: A clean break StandFirst: Janet and Paul, one of Wiseacre Financial Planners' most valuable client couples, are divorcing. Is there an ethical way to retain both of them as clients? PublicBody: Wiseacre Financial Planners has been established for over 20 years, and despite some ups and downs, its two partners Ben and Gary generally regard themselves as being successful. Their client base is quite mixed, and while they have a number of older clients who require a disproportionate amount of attention for the fees that they pay, the partners feel that is simply a part of the price of being well known for accessibility. PrivateBody: Wiseacre Financial Planners has been established for over 20 years, and despite some ups and downs, its two partners Ben and Gary generally regard themselves as being successful. Their client base is quite mixed, and while they have a number of older clients who require a disproportionate amount of attention for the fees that they pay, the partners feel that is simply a part of the price of being well known for accessibility. One day Ben receives a phone call from Paul, one of his most highly valued clients who, with his wife Janet, controls assets of about £25m. Ben is surprised when Paul asks to meet him but, unusually, neither at Wiseacre's office, nor at Paul's business, but at a well known firm of solicitors. Ben wonders what the reason might be, and as an optimist guesses that Paul is involved in another business deal, which may involve rearranging or perhaps liquidating some of his assets. On arrival at the solicitor's office, Ben is shown into a meeting room where Paul is already waiting, on his own and looking very solemn. After exchanging the usual pleasantries, Paul tells Ben that he has asked to see him because he and Janet have separated and they will be getting divorced. He has discussed this with the solicitor who, while having some knowledge of Paul's finances, felt that Ben as his financial planner would have a better grasp of what assets Paul and Janet have between them and who actually owns what. Ben cannot cut himself in half to represent both Paul and Janet dispassionately and objectivelyBen says that he is very sorry to hear this news and that it puts him personally and professionally in quite a difficult position. He and his wife had become friends with Paul and Janet, and it would be very difficult, on a personal level, not to take sides and, professionally, almost impossible. Ben cannot cut himself in half to represent both Paul and Janet dispassionately and objectively in advising how they might deal with their wealth, a large part of which comprises a successful and functioning business, in which they have both played a part. There would be, in the immediate future, many conflicts of interestPaul says that he appreciates there will be some difficulties, but he suggests that perhaps Ben could consider looking after Paul's side and Gary could look after Janet. Thinking of various immediate difficulties, Ben says he is not convinced, but tells Paul that he will discuss with Gary what he has learned, and together they will consider what Paul has suggested they might be able to do. Gary is very surprised to hear Ben's news, particularly Paul's suggestion that Wiseacre might continue to help plan the finances of both him and Janet, provided that each one is handled by a different partner, and his initial thought is that it really will not work. He does not have an intimate knowledge of their affairs, but there would be, at least in the immediate future, many obvious conflicts of interest. But while reviewing what might actually be involved, Gary also looks at the fees that they currently charge for this relationship and says to Ben, only slightly in jest, that the loss of this business would mean that he would have to choose between whether to keep his Mercedes or his personal assistant. They will not be able to afford them both. So is there a way in which Wiseacre can protect some or all of its earnings, while acting with integrity, or must they accept that they can represent one party or the other, but not both? At the moment they have been led to believe that matters between Janet and Paul remain 'cordial', but when it comes down to apportioning assets, that may easily change and where might that leave Wiseacre then? While accepting that having only just become aware of the situation and so, possibly, it is premature to be trying to make a decision,Ben and Gary sit down to consider some possible options. They decide first of all that they must adopt a high-level approach to doing what is right, so at this stage, they must disregard the structure of the couple's portfolios and the impact that changes will have on it and their initial objectives. Their discussion leads them to identify four possible options. Click the green button below to let us know what you think Ben and Gary should do. What should Ben and Gary do? This dilemma appears in the September print edition of The Review. The results of the survey and the opinion of the CISI will be published in the December 2016 print edition of The Review. === Title: Grey matters ethical dilemma: Creative accounting? StandFirst: Edward at Ignitius discovers that he has been paying invoices from his regular subcontract partner firm that do not represent the actual services provided. What should Ignitius do? PublicBody: Edward is the head of training at Ignitius, a large national business that sometimes employs subcontract training companies and individuals to deliver training on its behalf throughout the country. This training includes preparing students for work by making 'educational visits' to potential employers, during which the students are accompanied by the trainer, thus giving rise to additional costs. Linda Parkinson, trading as Liberate, is one of their frequently used partner firms and has been delivering an ongoing programme to employees from a part of the country classified as a developing area, where government grants are available to firms providing skills-related training. PrivateBody: Edward is the head of training at Ignitius, a large national business that sometimes employs subcontract training companies and individuals to deliver training on its behalf throughout the country. This training includes preparing students for work by making 'educational visits' to potential employers, during which the students are accompanied by the trainer, thus giving rise to additional costs. Linda Parkinson, trading as Liberate, is one of their frequently used partner firms and has been delivering an ongoing programme to employees from a part of the country classified as a developing area, where government grants are available to firms providing skills-related training. Liberate submits monthly invoices to Ignitius that are generally paid in a timely manner, normally having been approved by Francis, who holds the necessary authority. When Francis is not available, invoices are referred upwards to Edward for authorisation. The system has been working satisfactorily for over a year until an occasion when both Francis and Edward are unavailable and Liberate's monthly invoice is handled by Lee. Lee has not been involved before and so is unsure how to react when, on returning from lunch, he finds a note on his desk indicating that a telephone call has been received from Liberate advising that they have made a mistake in the wording of their most recent invoice and that they will be submitting a replacement. The first invoice had included a reference to educational visits, which are a bit of a grey areaA few days later, Lee receives the replacement invoice from Liberate and, as he is looking at it, his telephone rings. The caller announces herself as Linda from Liberate. She thanks Lee for agreeing to help with the resubmission of the invoice and explains to him that the first invoice had included a reference to educational visits, which, she explains, are a bit of a grey area. Lee says he doesn't understand what she means, so Linda explains that there has been some debate over whether the school visits should be classified as work-related training. Her partner had discussed this with the government agency responsible for the training grants, and was told that it "probably would be acceptable", but this hadn't been confirmed in writing. Accordingly, Liberate wants the invoice to make no mention of the visits, in case that causes a delay in them obtaining the grant monies. Linda goes on to say that Liberate's fees for undertaking this work are based on the assumption that they will be able to claim the grant monies and that if they cannot do so, it will make the work uneconomical for them and they might have to reconsider whether they can continue the training on behalf of Ignitius. Lee is concerned at being told this, principally because it relates to matters in which he has had no involvement and he decides that he will raise the matter with Edward. On hearing what Lee tells him, Edward's initial reaction is that it is a problem only for Liberate, which will have to live with the consequences, but, on thinking about it a bit more, he realises that there are, in fact, a number of reasons why the position of Ignitius is not quite so simple. For example, now that Ignitius knows about the problem, if indeed it is a problem, should they try to resolve it, and if so, how? What should they do?A. Accept what they have been told without comment and amend the invoice as requested. B. Tell Liberate that they cannot be a party to any form of sharp practice and terminate their contract immediately. C. Accept that it is in their interests to try to resolve the situation with Liberate and encourage them to discuss the situation with the grant-awarding body. D. Report the matter directly to the grant-awarding body, including a calculation of the amount of money that they believe Liberate may have wrongly claimed. This dilemma appears in the January print edition of The Review. The results of the survey and the opinion of the CISI will be published in the April 2017 print edition of The Review. === Title: Grey matters ethical dilemma: Marginally evasive StandFirst: Jonathan consults management after reading a note of a conversation about tax avoidance. He is told it is none of his business and that, in any case, the transaction has been approved. What should he do? PublicBody: Listen to Rebecca Aston, CISI manager, ethics and integrity talking on the BBC World Service about whistleblowing Jonathan works for an investment bank which is particularly noted for producing innovative financial solutions for its clients, and adopts a similar approach for its own internal tax planning. These solutions often employ aggressive tax planning, although the firm is careful to ensure that it obtains appropriate legal and accounting opinions to support its schemes. Because of the amounts of money involved and the fees that it charges, the bank employs leading experts in their fields to issue these opinions. PrivateBody: Listen to Rebecca Aston, CISI manager, ethics and integrity talking on the BBC World Service about whistleblowingJonathan works for an investment bank which is particularly noted for producing innovative financial solutions for its clients, and adopts a similar approach for its own internal tax planning. These solutions often employ aggressive tax planning, although the firm is careful to ensure that it obtains appropriate legal and accounting opinions to support its schemes. Because of the amounts of money involved and the fees that it charges, the bank employs leading experts in their fields to issue these opinions. Jonathan is not directly involved in the structuring of these deals but, as a senior member of the bank's chief accountant's department, he is aware of the transactions and frequently sees the papers on which they are based, without being a part of the decision-making chain. Conscious that the worlds of tax avoidance and tax evasion seem to be coming ever closer together, at least in the eyes of the public and, it would appear, the revenue authorities, Jonathan takes a close interest in what his firm is offering its clients and the potential loss of tax revenue to the country where he lives. While reading the papers connected with a recently completed transaction, which contain an opinion from a leading tax lawyer, his eye is caught by a note stapled to it headed: "Conversation between H_ and R_". Jonathan knows the name to be a leading tax barrister and the note is signed by one of the firm's managing directors. Jonathan reads the note and is particularly struck by the words: "Although H_ reiterated that he had concluded that the structure proposed does comply with all existing legislation, he warned that he considered it to be at the very margin of both legal and particularly social acceptability. Additionally, he added that, given the media focus on tax evasion (his words), we might wish to consider whether we really want to be involved in a scheme which has no obvious economic benefit to this country, and which will deprive it of a significant amount of revenue." His manager tells him that it is a done deal, and he will simply stir up a hornet's nest if he tries to take the matter furtherKnowing that the transaction has already taken place, Jonathan wonders whether anyone else in the firm, and if so who, has been made aware of the telephone conversation, and how they have convinced themselves that it is a good idea in the face of the comments from counsel. Jonathan considers what, if anything, he should do and who he might discuss his concerns with. He decides to approach his manager in the first instance, but when Jonathan voices his concerns during their next meeting, his manager tells him that it is a done deal, and he will simply stir up a hornet's nest if he tries to take the matter further. Not satisfied with this response, Jonathan decides that he will try to see R_, who has written the note, and he manages to make an appointment to do so for a few days later. Although R_ agrees to see Jonathan, when they meet he makes it clear that he considers the matter has nothing to do with Jonathan and he seems not at all pleased that Jonathan has read the note of his conversation with counsel. However, he does say that the matter has been extensively discussed at the bank's reputation committee, which has "approved" the transaction. At this point Jonathan feels that he is probably putting his career in jeopardy if he takes the matter any further. But when watching the news on television that evening, the latest figures are announced for government borrowing and they are at an even higher figure than expected, citing inter alia lower than expected tax receipts. Jonathan feels that what he has discovered at work is exactly the type of activity that should be prevented. Although it might now be too late to close that particular stable door, surely he could and should do something to prevent a recurrence? Accordingly, he determines four possible actions. What would you advise? This dilemma appears in the Q2 2017 print edition of The Review. The results of the survey and the opinion of the CISI will be published in the Q3 2017 print edition of The Review. === Title: Grey matters ethical dilemma: Creative accounting? The verdict StandFirst: Read the CISI's verdict on the ethical dilemma in the January 2017 edition of The Review PublicBody: Read 'Grey matters ethical dilemma: Creative accounting?' from the January 2017 print edition of The ReviewReaders were asked to decide on a course of action when faced with a request to amend the wording of an invoice from a supplier, Liberate, to enable them to claim grant monies, which would not otherwise have been available. Readers were offered four potential courses of action: A. Accept what they have been told without comment and amend the invoice as requested. B. Tell Liberate that they cannot be a party to any form of sharp practice and terminate their contract immediately. C. Accept that it is in their interests to try to resolve the situation with Liberate and encourage them to discuss the situation with the grant-awarding body. D. Report the matter directly to the grant-awarding body, including a calculation of the amount of money that they believe Liberate may have wrongly claimed. No one felt that having been alerted to the fact that all was possibly not as it should be, that it would be reasonable to carry on regardless. However, one wonders whether, had the usual administrator been at work, the matter would have ever seen the light of day. So, having decided that some form of action is necessary, the question is how one should approach the matter. Here, most readers felt that the middle course of action, option C, would be most appropriate, with which we do not disagree. Even so, it would be sensible to ensure that this is followed up, so that having taken the initial step, the matter is not then allowed simply to 'slip off the radar'. Response B attracted several responses, but the weakness of this course of action is that it is a rather hostile response to a situation where, at this point, you do not have a full understanding of what may be involved. Response D was the second most popular, but as with response B, you appear to be pre-judging the situation since you do not yet have the information required to make the necessary calculation. It really is a step up from the course of action in response B and so may be considered unduly hostile as a first step. This verdict was originally published in the Q2 2017 print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'. PrivateBody: === Title: Grey matters ethical dilemma: Warn or weed out? StandFirst: Brandon and Greg's firm has become aware of a photo they have shared that shows them indulging in a recreational drug while on holiday at a location where the drug is legal. How should the firm deal with this? PublicBody: Brandon and Izzy met at the UK branch of a major international financial services firm where they both work. After a few years they decided to get married. For the honeymoon, they chose to spend time in the US, starting with a week in Las Vegas, then followed by a week skiing in Vail, Colorado – a place they had always wanted to visit. All went as planned and the wedding lived up to their hopes and expectations – the flight to Las Vegas even departed on time! The attractions of five nights in Las Vegas meant that by the time the couple got to Vail they were feeling ready for a rest. But the desire to explore got the better of them and they were soon itching to hit the slopes. PrivateBody: Brandon and Izzy met at the UK branch of a major international financial services firm where they both work. After a few years they decided to get married. For the honeymoon, they chose to spend time in the US, starting with a week in Las Vegas, then followed by a week skiing in Vail, Colorado – a place they had always wanted to visit. All went as planned and the wedding lived up to their hopes and expectations – the flight to Las Vegas even departed on time! The attractions of five nights in Las Vegas meant that by the time the couple got to Vail they were feeling ready for a rest. But the desire to explore got the better of them and they were soon itching to hit the slopes. Chance meeting While strolling about the village the couple were surprised to hear Brandon's name being called. A man came hurrying towards them with his hand outstretched in greeting. "Hi Brandon, what a surprise to see you here – and this lovely lady you are with must be Izzy?" Turning to Izzy, he introduced himself as Greg, a colleague from their firm's Chicago office, whom Brandon had met on a couple of business trips to the US. Greg explained that he was also on holiday in Vail, where his family owned a timeshare apartment, and he insisted that Brandon and Izzy should join him and his partner for dinner before they returned to the UK at the end of the week. Unable to say no to Greg's generous invitation, the couple agreed that they would meet for dinner in a restaurant and then go on to Greg's apartment for a nightcap. "Wonderful end to the vacation with Brandon; can't wait for this to be legal everywhere!" After five days of exhilarating skiing and accompanying nightlife, Brandon and Izzy returned home feeling that they had achieved their dream holiday. As an added bonus, Greg had invited them to join him in Vail for a future visit. Returning to work was a struggle but sharing photos of the trip with colleagues kept the memories fresh for a while longer. Three weeks later, Brandon is called into his manager Karl's office, where Karl tells him that Carol in the HR department has asked to see him at 4pm that day, although she has not said what it is about. Brandon tries to draw Karl on what it could be, but Karl insists that he knows nothing. Mystified, Brandon returns to his desk and spends the next hour imagining all the things that HR might want, before making his way there for the 4pm appointment. Brandon is shown into Carol's office and is somewhat surprised when her opening comment is that she enjoyed his photographs from Vail, and that it looks as though he had a very good time. This leaves Brandon feeling slightly alarmed and wondering how Carol has seen his pictures. However, he is unconcerned about the content,which he believes is quite innocuous. Carol then passes her iPad across the desk and Brandon sees a picture of himself and Greg leaning back on a sofa in Greg's Vail apartment, wreathed in smoke, with the caption under the picture saying: "Wonderful end to the vacation with Brandon; can't wait for this to be legal everywhere!" Seemingly innocent, Carol asks Brandon what "this" might be, to which Brandon responds by asking the nature of her enquiry and whether he should be accompanied by someone before answering. The dilemma: Brandon has gone on holiday to a state of the US where the use of cannabis in private is legal. A breach of contract terms From a photograph posted on social media, Brandon's employer has become aware that he appears to have used a drug which is illegal in the UK. Furthermore, the use of the drug is in breach of the terms of his contract. Another employee of the firm, who is employed in the US, has also apparently used a recreational drug, the use of which is legal in the state where it was consumed, although not throughout the US. Accordingly, it does not constitute a federal offence. But it is against his firm's term of employment. How should the firm handle this? A. Although contrary to Brandon's terms of employment, the 'offence' did not take place on company property and was not in itself illegal. It will not bring the firm into disrepute and a warning as to Brandon's future behaviour is sufficient. B. Since Brandon is in breach of his terms of employment, he must be subject to the firm's formal disciplinary process. C. Brandon was on holiday at the time and his firm should just ignore the social media posting. D. The firm must ensure that whatever action is pursued must apply equally to both Brandon and Greg. This dilemma appears in the Q3 2017 print edition of The Review. The results of the survey and the opinion of the CISI will be published in the Q4 2017 print edition of The Review. === Title: Grey matters ethical dilemma: Marginally evasive – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma in the Q2 2017 edition of The Review PublicBody: Read 'Grey matters ethical dilemma: Marginally evasive' from the Q2 2017 print edition of The ReviewThis dilemma, originally published in the Q2 print edition of The Review, was the top read in the online Review. Perhaps not surprising as in several recent surveys on public attitudes to corporate behaviour, 'paying their fair share of tax' has been respondents' top concern. There were many well-considered comments, for which we thank you. A selection of these are shown here, along with the results from the survey and the CISI verdict. In this dilemma, the company has already taken an action and so the question asked of readers is to determine what Jonathan should do when he becomes aware of the actions of his employer, but only after the event. Options offered and results from survey Contact the BBC to tip them off about his bank continuing to offer aggressive tax planning to clients and undertaking similarly questionable schemes for its own benefit. (2%) Contact H_, the bank's counsel, to confirm whether he had the conversation with R_, and whether the content of the note is accurate. (4%) Contact the bank's Speak Up line to report his concerns about the bank providing tax solutions that appear to be unacceptable and about his treatment by R_ when he tried to discuss his concerns with her. (68%) Seek to discuss his concerns with the senior independent director. (26%) The CISI verdictWhile it may be tempting to contact the BBC (option A), this is not an appropriate choice, as those who have attended a CISI Speak Up presentation will be aware. Contacting the media is very much a last-resort action. There is no evidence that this point has yet been reached. Contacting the bank's counsel (B) is only slightly more popular and, in terms of the CISI's recommendations, this may be considered under the heading of 'do not become a prosecutor'. Because contacting the whistleblowing line is offered as an option (C), most respondents chose it as the most appropriate action but, given the nature of the concern, this might be characterised as a 'protest vote'. However, if the line properly records and reports on calls made, then the firm's whistleblowing champion might communicate this dissatisfaction to the executive in an effective manner, if he or she thinks it appropriate. Whether that influences matters in the future is a moot point. Option D is the second most popular course of action and that which we would recommend. The advantage of this over (C) is that it provides Jonathan with the opportunity to share his views directly with someone of influence, rather than through the filter of the whistleblowing line. Some reader comments"It was his treatment that should be a red flag (ie, is anything being swept under the rug), rather than the transaction itself, which seems to be within the firm's risk appetite." "Using the whistleblowing process will provide Jonathan with employment protection in the circumstances and an investigation will be carried out by those of sufficient authority to get the answers and resolve the matter." "Having escalated internally as much as he is able, the Speak Up line is the most appropriate route to raise concerns. It would be wrong and doubtless contrary to internal conduct rules to disclose confidential information to third party media. There seems little to be gained in verifying the accuracy of the note with counsel as that does not take things any further forward. Raising with the senior independent director may be an alternative route but Jonathan is concerned about his own career prospects - moreover, the Speak Up line is (or should be) independently managed, so better ensures appropriate escalation." "Option A takes the matter away from an independent internal review at too early a stage to be a justified solution for a senior employee and should only be considered a last resort. Option B is outside his direct authority and if confirmed offers no particular comfort. The Speak Up line is likely to be assessed by people that have limited or no authority to act and he is unlikely to be a party to any discussions. Assuming the matter troubles his conscience, D provides a direct line to independent and senior management, whose job it is to have input into matter of conduct. It is not without risks, but is also a defensive line of questioning that should not get him sacked." "Does Jonathan want to work for an organisation that works in this way? Whatever he does it is likely to get back to senior management and life may become difficult, although that is no excuse for doing the right thing. My suggestion is that he seeks to discuss his concerns with the senior independent director in the first instance. If this gets him the rebuff he has had already, to try the BBC but accept it may be the end of his career. If he does nothing and the firm's actions are discovered later, there could be huge reputational damage. While contacting the bank's council may look attractive, far better this is done by someone at an appropriate level. One would hope an independent director would do his duty to protect the bank financially and reputationally, but there have been numerous cases of banks sailing too close to the wind too often and being caught out eventually. Ultimately it is the shareholders who will pay and as a shareholder I would want actions like this stopped." "I am assuming that the Speak up line is a whistleblower line. Whether his career is in jeopardy or not he must see this through. His manager will not listen so it should be investigated by another. A senior independent director may not have the expertise to investigate while the whistleblower line will be able to call on appropriate skilled individuals to consider the situation." "This particular dilemma is absolutely timely, given the current revelations concerning Jes Staley and his attempts to identify a whistleblower. The statement from the Barclays' board was that Mr Staley had "honestly, but mistakenly, believed that it was permissible to identify the author of the letter and has accepted his explanation that he was trying to protect a colleague who had experienced personal difficulties in the past from what he believed to be an unfair attack, and has accepted his apology". This is wrong – a clear case of abuse of authority, and a far more serious matter. In the CISI dilemma, Jonathan must consider option C as a minimum course of action. Option A is also needed, as there is already a "trail of concern" as R__ has already been alerted as to the 'whistleblowing' potential of this matter." "An aggressive tax scheme with significant legal, tax and reputation issues would need to have been approved at board level and, or received clearance/approval from the firm's head of legal and head of finance, as well as the firm's reputation committee (as indicated here). Jonathan may wish to verify that the note, or at least its contents, were divulged to these parties before a decision was made by them. If not, he should divulge the contents to these people immediately. If the key decision-makers were aware of counsel's legal/ tax advice but accepted the risks involved in the transaction, Jonathan may still raise any continuing concerns, if any, internally to the senior independent director and/or use the internal whistleblowing procedures, such as the bank's Speak Up line, to report his concerns. This should be undertaken before whistleblowing externally to the FCA and certainly before going to the press. The press should only ever be advised once all other avenues have been exhausted and/or when exposing unlawful acts known to senior management which are not being remediated and disclosed to relevant competent authorities." "I say 'C' but in the FT there is an article that the CEO of Barclays tried to uncover the identity of a whistleblower and was having his pay cut for doing so. Therefore I can understand if people feel intimidated but hopefully because of the actions taken against the CEO it gives comfort that whistleblowers will be protected." "Jonathan is legitimately perturbed. It is just such inventive, often borderline schemes which have largely diminished governance standards & led to a serious trust deficit. Ideally, pursue C and D simultaneously. My thanks to your team for opening up such relevant, sensitive lines of discussion." "In the world of 'Grey matters' Jonathan should, initially at least, call the Speak Up line. In the rather more complex real world his options are to do nothing or contact an external party (BBC) and stand by for the storm that it potentially may bring. The Lux-PwC aggressive tax scheme disclosures and subsequent court cases and the Barclays whistleblower witch hunt sanction at the highest level (CEO!) is prima facia evidence that the financial world remains highly averse to having its business activities exposed to the hygiene of public scrutiny." "In addition I would send an email to his line manager copying in H, detailing the conversations that he has had with them both and their replies ..." "I've answered this way on the assumption that in a larger organisation the Speak Up is the firm's implementation of whistleblowing obligations and that, if operated correctly, ought to have a non-executive director involved, together with a very senior executive director, if not the CEO. One would hope that the former would challenge the latter. If my assumption is correct, then the outcome is effectively the same as answer D. Therefore, if Speak Up is just a glib internal scheme put in place by HR with little executive 'buy-in' then my answer would be D." "It would be a lot easier if tax revenue was spent responsibly. Is there an argument that tax avoidance is ethical, given the way in which governments waste taxpayers money and the questionable legitimacy of the current administration?" "Firms offering tax avoidance schemes are required to have specific schemes vetted through HMRC. It is not known from the case notes offered whether this has been done. This should form part of Jonathan's discussion with the senior independent director – to check this has been done, fully, and that the relevant 'approval' has been received from HMRC." "I opt for C as H, the bank's counsel might not take the call or respond to an email from Jonathan in B as he would be unknown to H as the opinion was given in confidence. If Jonathan receives a response that he considers is acceptable he should pursue Option D but advise the Speak Up Line before doing so. The approach to the senior independent director would be on the basis that offering aggressive tax planning to clients and undertaking questionable schemes is causing reputational damage to the bank." "In fact C & D are very similar but I have a preference for going straight to board level without getting too many other people involved by using the Speak Up line. At least he will have discharged his duty bringing the matter to the attention of an independent director who will hopefully take the matter forward. If the matter is not resolved to his satisfaction he may want to consider if he wants to continue working at this bank." "Whether the reputational risk of this sort of business is acceptable to the bank is a policy decision for the bank's senior management and ultimately the Board. Whatever Jonathan's own feelings on the matter, he should not try to impose his own value judgment on those who carry the responsibility for the decision. He should certainly not unnecessarily damage his employer by going public to the BBC. But his own level of seniority and technical knowledge put him a position where he should seek to ensure that facts and associated risks have been properly presented at the most senior appropriate decision-making level within the bank. In this case that is the Board so the senior independent director is an appropriate channel, if unusual. However, it is also appropriate for him first to confirm (by contacting H) that he has a correct understanding of the legal advice which has been given." PrivateBody: === Title: Grey matters ethical dilemma: Trust in conflict StandFirst: Philip must balance his role as a trustee and a financial adviser to the trustees, with the responsibility to act in the best interests of his long-standing client. How should Philip proceed? PublicBody: Philip has been a financial planner and adviser to the Evergreen family for several decades, having begun the relationship when advising the late Brian Evergreen on making provision for his wife and four children following his retirement from the armed forces. Brian had unfortunately died from cancer in his early seventies. The disposition of Brian's assets included putting them in trust for his wife Eileen, who was anticipated to remain during her lifetime in the family home, funded by income from Brian's other financial assets and her pensions. Following Eileen's death, all the remaining assets will pass equally to their four children. Philip is both a trustee and acts as financial adviser to the trustees, for which service he makes an annual charge to the trust of £1,000. PrivateBody: Read the results of the survey, the CISI verdict and readers' commentsPhilip has been a financial planner and adviser to the Evergreen family for several decades, having begun the relationship when advising the late Brian Evergreen on making provision for his wife and four children following his retirement from the armed forces. Brian had unfortunately died from cancer in his early seventies. The disposition of Brian's assets included putting them in trust for his wife Eileen, who was anticipated to remain during her lifetime in the family home, funded by income from Brian's other financial assets and her pensions. Following Eileen's death, all the remaining assets will pass equally to their four children. Philip is both a trustee and acts as financial adviser to the trustees, for which service he makes an annual charge to the trust of £1,000. Eileen is now eighty years old, and although physically quite robust, she is suffering increasingly from dementia. This is compounded by the fact that she recently fell at home and broke a hip, which necessitated a stay in hospital. Although Eileen's hip was successfully repaired, she was not able to walk again immediately, and the hospital sought the Evergreen family's involvement in her rehabilitation. Discussions about how to care for their mother focused the attention of her children both on how best to care for her and also on how to pay for the type of care that was felt most appropriate. As a trustee, Philip was involved in these discussions, which proved quite troubling for him in many ways. When Brian Evergreen set up the trust, the invested assets had seemed adequate to provide sufficient income for Eileen to enjoy a relatively comfortable lifestyle, although the assets had been diminished somewhat by some essential but expensive work that had to be undertaken on Eileen's home. Use of the capital of the trust for this sort of purpose is permitted by the trust deed, but there are restrictions on its unfettered use. The children had anticipated that on Eileen's death they would each inherit a reasonable sum of money, and two of them had entered into the expensive commitment of private education for their children, the provision for which appears to weigh on their minds as much as the need to protect their mother. There are restrictions on the unfettered use of the trust At a meeting to discuss Eileen's future, the family suggested various options without much apparent thought for what they might cost, including an option to move Eileen to a highly regarded residential care home which also caters for residents with dementia. The current fees for this are £40,000 per year to care for Eileen in her present state, but the cost will almost certainly increase as her condition deteriorates. Alternatively, they might adapt her home and employ full-time care for their mother, while accepting that in either case they are likely to encounter resistance from Eileen. This course of action might involve depletion of both capital and income. Philip felt that he should inject a note of caution into the discussion so that the trustees focused not just on Eileen's welfare, but also on the financial ramifications of the various courses of action. He pointed out the danger that the trust assets might not generate sufficient income to cover all the costs of looking after Eileen and that the longer she lives, particularly if assets are liquidated, the more rapid this liquidation will become. Philip is concerned about the apparently conflicting pressures on the trustees in the matter of Eileen's care, conscious that while he is involved as a trustee, his is a minority view, and can be outvoted by family members. How should Philip proceed? Read the verdict This dilemma appears in the Q4 2017 print edition of The Review. The results of the survey and the opinion of the CISI will be published in the Q1 2018 print edition of The Review. === Title: Grey matters ethical dilemma: Warn or weed out? The verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the Q3 2017 edition of The Review PublicBody: This popular dilemma, published in the Q3 2017 print edition of The Review, raises points about an employer's response to information obtained from social media, the monitoring of social media itself and enforcement of a firm's terms of employment. There were many well-considered comments, for which we thank you. A selection of these are shown here, along with the results from the survey and the CISI verdict. PrivateBody: Read 'Grey matters ethical dilemma: Warn or weed out?' from the Q3 2017 print edition of The ReviewThis popular dilemma, originally published in the Q3 2017 print edition of The Review, raises points about an employer's response to information obtained from social media, the monitoring of social media itself and enforcement of a firm's terms of employment. There were many well-considered comments, for which we thank you. A selection of these are shown here, along with the results from the survey and the CISI verdict. Options offered and results from survey A. Although contrary to Brandon's terms of employment, the 'offence' did not take place on company property and was not in itself illegal. It will not bring the firm into disrepute and a warning as to Brandon's future behaviour is sufficient. (50 responses) B. Since Brandon is in breach of his terms of employment, he must be subject to the firm's formal disciplinary process. (40 responses) C. Brandon was on holiday at the time and his firm should just ignore the social media posting. (16 responses) D. The firm must ensure that whatever action is pursued must apply equally to both Brandon and Greg. (19 responses) The CISI verdict What is likely to be a key determinant by any employer in such a case is whether an employee's actions are in breach of their terms of employment. If not, on what basis can the firm respond? In this instance, a majority of respondents (90/125) said that action should be taken, from which a slight majority (50/125) said that as this is not a major offence, a warning would be sufficient. We believe that such an approach is the most appropriate. A further 16 respondents said that as the potential offence took place while Brandon was on holiday, the whole matter should be ignored, and 19 respondents did not commit themselves to any specific action, beyond saying that Brandon and Greg should be treated equally. Interestingly, no one suggested that Brandon's wife Izzy, who is also an employee, might be dragged into this, as she was also present when the potential offence took place. Did she have a responsibility to try to prevent it? It is something of a moot point as to whether Brandon's actions might be deemed to breach Principle 8 of the CISI Code of Conduct. NB: A recent (Sep 2017) ECHR ruling against firms 'spying' on employees' messages might also be considered when deciding on an appropriate response. Some reader comments "The terms of employment should be updated to reflect relevant changes in legislation!" "Formal disciplinary process must be followed during which extenuating circumstances and mitigating factors can be taken into account." "Irrespective of where the incident occurred, B is the only fair answer because the breach is clearly stated in his contract of employment, and to ensure fairness, the formal disciplinary process should be followed. That way an audit trail is clearly visible should this behaviour escalate into something more concerning at a later date." "We would not be having much of a discussion if a Saudi firm was firing a Saudi national photographed consuming wine while on holiday (we would indignantly be crying 'unfair'). The potential examples are endless. Why the double standards?" "Since it is a matter of ethical disposition which has nothing to do with legality, Brandon is expected to act in good faith and keep to the terms of his contract by staying away from cannabis or any drugs whether in or out of office." "Without knowing the limitations or extent of the clause that related to the non-consumption of illegal substances, it would be difficult to resolve on this information alone. This would be a legalistic interpretation and may relate to where the company is incorporated or headquartered, and therefore the absence of legal clarification as to which legal jurisdiction applies might be key here, ie, if the company is headquartered or incorporated in a state where such a drug is not illegal, and the relevant applicable law is not stipulated in the employee's contract, then a 'good' lawyer could have a field day in defending the 'guilty party'. It may be that whoever drafted the contractual terms of employment didn't even allow for this cross-jurisdictional anomaly. While the use of contentious or illegal substances may give cause for concern to many clients, particularly in an older generation, as there is no malice or premeditated intention involved, combined with the fact the guilty party is not actively promoting its consumption and is not actively publicising his enjoyment in the company's name or to clients thereof, his 'naivety' warrants a formal warning, at the very least, not least because of brand management and reputational issues – given that a cross jurisdiction anomaly may exist here. Regrettably, there is too much naivety by many about the dangers and limitations of social media and how it can unfavourably juxtapose one's own behavioural profile with the image/brand management aspirations of one's employer. That problem is not going to get any easier the more media savvy everyone becomes." "The legality doesn't seem to be the problem at all here. If he has not broken the law of the land where he engaged in the activity, he has done nothing legally wrong. I'm not sure what the precise argument would be, but perhaps there's even a 'bullfighter defence' available. The main issue really does seem to be to do with the terms of employment. If there is a breach here then it must be dealt with according to company policy and procedures." "This is a close dilemma in that the action did not take place on company property and was not in company time and within a closed environment. That being said, as he is representing a brand in and out of work it would be very understandable if the firm pursued formal proceedings as the images were exposed online and therefore brings the company's reputation into question. But I believe a formal warning would be sufficient. The process should also mirror that of the other employee in the US in order to keep things aligned." "Consistency for enforcement of employment terms must be ensured, otherwise Brandon may have a claim for unfair dismissal should that be the outcome of any formal disciplinary procedure. The HR team must confirm with their counterparts in the other jurisdictions what their position is in relation and what their intended action following up with Greg will be before proceeding, as this may help inform their decision on how to address this." "The firm should ensure that Brandon, and if possible Greg, attend some form of drug counselling, although the multinational issue might cause some difficulty in dealing with both employees equally." "Most 'offences' of which an employee could conceivably be found 'guilty' would not happen on company property – this is a red herring. So is being on holiday, for the same reason. Information about employee behaviour could come from many sources – just because it's on social media doesn't mean it can just be ignored. Who says this will not bring the firm into disrepute? How would clients know that this was a one-off (for Brandon) and not a regular occurrence (apparently more so for Greg)? If the contract says the use of any drug is a breach, and assuming it is conceded that smoking cannabis did actually take place (ie, it's not just a stupid comment below a picture of regular smokers!) then pursue disciplinary actions for the breach – applying the rules equally to Brandon and Greg. Presumably, as this is a first 'offence', complying with a good conduct requirement will not prove onerous for Brandon – potentially more complex for Greg if he is a regular user." "The firm does not know what 'this' actually is. The HR rep has reached a conclusion which it cannot prove – tricky position to be in if it takes any action. "Do the UK terms of employment for Brandon have extraterritoriality? A clear extension into a differing geographical area noting that UK law and the employment terms take precedence and those activities which are legal locally are not considered legal for employment purposes? "If silent then the guide is what will be the firm's position on Greg - equal treatment is paramount but there is a friction in the potential to dismiss one and not the other." "A is a reasonable solution although Brandon should be left in no doubt about adherence to his terms of employment since there is a danger that use could continue in the UK." "If this is in breach of both their contracts, then Brandon and Greg must be treated equally. While they haven't broken any laws, they've been naive in posting the photograph publicly – both should be asked to remove the photograph and to think more carefully in the future. I don't believe either should be subject to a formal disciplinary." "Big Brother watching you is not a good way to motivate a workforce." "This activity took place outside of work without any association to the company, as well as in a place that it is deemed legal to do so, and therefore shouldn't receive more than a verbal reprimand." "Not enough detail is provided in the case study with regards to the company's policy on drugs. From the detail that is provided it suggests that the company doesn't allow for any illegal drug taking while being employed by the company, therefore I've selected B. However, most companies I've worked for usually stipulate that employees are not allowed to be under the influence of legal or illegal drugs or alcohol at work and during work hours. If the company's policy states that it is against illegal drug taking, then Brandon could have a case to say that the recreational drug use was fully legal, as at the time he was in a place where it was fully legal to do so I would err on the side of caution with regards to his disciplinary action." "Purely in terms of employment and contractual law, there are grounds to drug test both employees and put them both through the formal disciplinary process or worse. It may be strongly noted to Greg that not only has he breached the recreational drug use term of his contract, he is also not welcome to publicly share and encourage such acts to other employees and/or more widely." "The incident cannot be ignored so a formal process is required. However, on the evidence available it is unclear that Brandon was aware that he was committing an offence or that he has done any harm. He should be made aware of his lapse and demonstrate contrition. Greg is more culpable as he appears to have enticed Brandon into a 'sting' and then boasted of it." "It may appear a little harsh, but seeing as he has breached his terms of employment, the firm must follow through on formal disciplinary proceedings, which in any event may only lead to a verbal or written warning. The issue, however, should not simply be ignored as terms of employment work both ways, to protect the employer and employee, and should not be taken lightly." "My answer assumes that there is an element of discretion in the formal disciplinary process that provides for sanctions that do not necessarily lead to dismissal." "Prostitution and pornography is legal in some countries, but if either had pictures on social media with prostitutes or enjoying pornography I don't think many companies or customers would find this acceptable. This also applies to alcohol. Alcohol is legal in most countries, but if there were a picture of a staff member on social media absolutely hammered looking like a degenerate in his own home I'd be concerned. They should at least ensure their profiles aren't public. That should be a basic understanding working in finance." "There may be a question of what is in the terms of employment. If it states the use of illegal drugs, then surely it doesn't apply in this case. Presumably it is highly unlikely that any contract would list which drugs are acceptable and which are not." === Title: Grey matters ethical dilemma: Gold digger StandFirst: Financial adviser Karlie is worried that her client is being taken advantage of. To what extent, if any, should she intervene? PublicBody: Karlie is a financial adviser who had advised George for many years. George and his wife Jan had separate investments, and Jan had her own adviser. Jan ran a successful business but decided to retire early following a brain haemorrhage. George told Karlie that, thankfully, Jan made a full recovery following a successful operation, but decided to retire to pursue a quieter life and enjoy other hobbies. One day, Karlie is informed that George has passed away. Over the next few weeks, Karlie helps with the transfer of George's investments to Jan, the sole beneficiary of his estate, and during this time Jan informs Karlie that her own adviser is considering retirement. Karlie is invited to several meetings to present her firm's services to Jan and her retiring adviser, and is eventually appointed as Jan's new adviser. PrivateBody: What, if anything, should Karlie do?Karlie is a financial adviser who had advised George for many years. George and his wife Jan had separate investments, and Jan had her own adviser. Jan ran a successful business but decided to retire early following a brain haemorrhage. George told Karlie that, thankfully, Jan made a full recovery following a successful operation, but decided to retire to pursue a quieter life and enjoy other hobbies. One day, Karlie is informed that George has passed away. Over the next few weeks, Karlie helps with the transfer of George's investments to Jan, the sole beneficiary of his estate, and during this time Jan informs Karlie that her own adviser is considering retirement. Karlie is invited to several meetings to present her firm's services to Jan and her retiring adviser, and is eventually appointed as Jan's new adviser. Karlie builds a trusting relationship with Jan over several years. Jan is a wealthy woman, with substantial investments, her own pension and a widow's pension. She could, in theory, afford to take some risks with her investments, but she is risk-averse and wants to ensure that she has money available for probable future healthcare. Neither Jan nor George had close family, but Jan is keen that money is left to provide for both sets of relatives on her death. Karlie has a copy of Jan's will, with listed beneficiaries, stored in her file. Karlie is worried that Paul is taking advantage of Jan, and wonders what to doIt becomes apparent that Jan is lonely, but she mentions regularly that she is wary of gold-diggers. Eventually, however, Jan tells Karlie that she has met someone through a dating app: Paul Goldman, who is more than ten years younger than her. Jan confides that she has already received several marriage proposals from him, even though they have not been together long, which makes Karlie wary of Paul's motives. However, she does not feel as though it is her place to say anything about the relationship. After six months, Paul sells his property and moves into Jan's house. With Jan's consent, he starts attending review meetings. The couple express an interest in travel – something Jan has not brought up before – and ask Karlie to invest some of Jan's money in investments with higher returns so they have more available funds to spend on this hobby. Karlie is concerned about this change in approach, but the amounts of money involved are not large, and she feels she would be overstepping her professional relationship if she were to express an opinion on this. At their next meeting, Jan explains that she wants to leave something to Paul on her death, and Karlie suggests that her pension drawdown might be appropriate. This is agreed, and the paperwork is completed. Jan seems a little forgetful and confused during this meeting, but Karlie cannot determine whether she is simply tired and a bit stressed, or whether this is as a result of the brain haemorrhage that Jan suffered (and recovered from) more than five years ago. Jan and Paul leave to go on holiday, and very soon afterwards Karlie is surprised to hear from Jan's pension provider that her access to Jan's pension information has been removed. Karlie calls Jan, who explains she and Paul are to marry before passing the phone to him. Paul, rather brusquely, informs Karlie that further discussion can wait until he and Jan return in several weeks. Karlie is worried that Paul is taking advantage of Jan, and wonders what to do. She does not want to damage her relationship with Jan, because (as well as liking her as a person) she is a valuable client, and Karlie has been well-remunerated while advising her over the years. On the other hand, Karlie wonders if this means that she has more of a responsibility to try and resolve the tricky situation Jan is in. What, if anything, should Karlie do? A. Things change, and Karlie's concern is an overreaction. Jan is happy, and still has ample funds in her name. It would not be appropriate for Karlie to take any action at this stage. B. She should tell Jan that she is not prepared to give piecemeal advice, and that unless her access to the pension policy is reinstated she will have to stand down as a point of principle. C. She should insist on meeting with Jan alone when she has returned from holiday, and set out her concerns, including how marriage to Paul might affect the wishes she set out when she initially appointed Karlie as her adviser. D. Karlie should have realised that Jan's brain haemorrhage made her a vulnerable client all along. It is clear that Paul is now controlling her and, as Jan has no close family, in order to safeguard her interests Karlie should report her concerns to the care authorities. This dilemma appears in the Q1 2018 print edition of The Review. The results of the survey and the opinion of the CISI will be published in the Q2 2018 print edition of The Review. === Title: Grey matters ethical dilemma: Trust in conflict – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the Q4 2017 edition of The Review PublicBody: Read 'Grey matters ethical dilemma: Trust in conflict' from the Q4 2017 print edition of The ReviewThis 'Grey matter', published in the Q4 2017 print edition of The Review, raises a relatable dilemma which highlights conflicts created when the interests of an aging relative and younger generations collide. There were many in depth and well-considered comments, for which we thank you. A selection of these are published here, along with the results from the survey and the CISI verdict. Options offered and results from surveyA. This is now a family matter. He has drawn their attention to the situation and it is now up to them to decide on a course of action. (12 responses) B. Regardless of the actual legal relationship between Philip and the trustees (Eileen's children), he has a moral responsibility to protect Eileen's interests. (22 responses) C. His duty of care to the trustees means he should consider the position of the remaindermen as well as Eileen, the life tenant, even though the remaindermen are also trustees. (88 responses) D. He should step down as a trustee. (11 responses) The CISI verdictWhile C is the most popular option (88/133 votes), respondents in the comments are evenly split over whether Philip's moral duty to Eileen should outweigh his duties to the trustees. Roughly half the respondents argue that care for Eileen is paramount, while others note that his role as trustee means he has a duty of care to all beneficiaries from the trust. What is likely to be the key determinant of Philip's role is the terms of the trust. Philip's duty of care is to uphold the purpose of the trust, and should the trust dictate that the interests of Eileen are paramount, Philip should face the difficult conversation with her children about the need to diminish the value of the fund to pay for Eileen's ongoing care. Respondents are also split about whether Philip should step down as trustee. For some, his role as adviser and trustee represents an insurmountable conflict, yet others say that he was appointed as a trustee by virtue of his independence and expertise. In fact, he is the least conflicted as the remaining trustees are also family members. He is the only trustee that is likely to fully understand the responsibilities that come with that position. Principle 5 of the CISI Code of Conduct requires Philip to manage a conflict of interest fairly and effectively, and so long as he declares any conflict and is honest, open, transparent and fair with all parties, there is no reason why Philip needs to step down as trustee. He should consider the position of the remaindermen as well as Eileen, but abide by the terms of the trust and the spirit in which it was set up. For this reason, option C is the CISI's preferred option. Some reader comments"My view on this is for Philip to explain in detail to the parties the implications of spending £40,000 for Eileen's care and to explain to the trustees what the financial implications of other options are." "B seems best, but does not seem to recognise that Philip is a trustee too, so it goes beyond moral responsibility and he also has a fiduciary duty to act in her best interests as the current beneficiary." "Three of the potential answers could be understood and explained. It is now a family matter as the children are the trustees and they are aware of the costs to be incurred, which in turn will have an impact on their futures in some financial ways, and he does have a duty of care to the trustees. However I do not feel that he should step down as a trustee. He was asked to act as a trustee; one assumes that this decision by the deceased father was taken in order to provide an element of independence and expertise in financial matters. Philip is also in a position to be able to make decisions or suggestions to the other trustees on a factual and non-emotional basis. Therefore, while Eileen is alive, the trust should be used to provide her with as comfortable a life as she would like and can afford. Her children should be encouraged to accept that they cannot fund expenditure based on the expectation that they will receive certain funds that are not yet theirs to use." "There is a very strong moral issue here. As trustee he has an obligation to protect Eileen which is implicit in the instructions from Brian. The other trustees seem to be acting out of self-interest, especially if they have gone ahead and undertaken commitments expecting that they would be covered with the provisions of the estate. Care for Eileen is paramount." "Somebody needs to have an unbiased view on Eileen's situation, to have her best interests at heart. The children are likely to make a decision influenced by the grandchildren." "None of the above options clearly describes Philip's position. Philip is a trustee. He has taken on responsibilities, which are not just moral or ethical. They are legal. He is obliged by law to act as per the trusts' written documents. What the trust pays out is not a family matter. His duty of care is to uphold what the purpose of the trust is. If the trust was created to take care of Eileen, then his job is to protect her interests, even if the other trustees have ulterior motives. The expectations of family members for an inheritance should not change his actions. Only if the trust actually was created to treat all potential beneficiaries in an equal manner – then Philip will need to balance the inheritance needs of the children and the mother. He can not just resign or run away from his duties just because he has to have an 'uncomfortable' conversation with the younger generation." "As a trustee, his duty is to fulfil the terms of the trust agreement. If the funds are there primarily for the benefit of Eileen, then his advice should be on how he can ensure the capital lasts for the rest of Eileen's life; not to maximise the funds for the benefit of the children. It seems to me that the interests of the children are in alignment with this (ensuring the best for Eileen's welfare); albeit they need the advice of what is financially achievable." "A tough one, however as the children are also trustees, when raising the issue and discussing – Philip can ensure that the children/remaindermen are aware of what they may be giving up in acting as trustees for their mother. While his duty of care should consider their position, should the remaindermen/children be happy to reduce inheritances to provide for their mother, this doesn't mean Philip can't agree with them. It could be argued that they have a better understanding of how the settlor would wish the change in circumstances to be handled and they can act as trustees in this, using their personal relationships with their father as guides on how best to proceed." "Philip as a trustee needs to consider both Eileen's needs and the remaindermen. Clearly Eileen's needs should be a priority. Immediate care annuities should be considered for Eileen's care. By taking into account her income and working out the balance of income needed, it should be possible to build an increasing annuity into the plan. This would give peace of mind that the fees would be paid for the rest of her life. It is likely that the house would be sold too and the proceeds of this, not needed to finance the annuity, could be invested in a diversified portfolio to not only provide top-up income for Eileen during her lifetime but also provide for the possibility that there would be something left over for the remaindermen on her death. Care should be taken to make sure that the sale of the property is excluded from the trust so that it doesn't negate the new 'nil rate' band." "There could be significant benefits for Eileen if she were willing to move into a suitable retirement home before her dementia becomes so severe that she is unable to establish new relationships and friendships. Could the trust assets be used temporarily to fund the care home fees, pending sale of Eileen's home to provide more substantial funding, if required?" "The family should seek to find out what help Eileen would qualify for from the state. Depending on how the trust is structured, it may be possible to pay funds to the children rather than directly to Eileen, thereby allowing her to potentially qualify for some care provision. Then the family could top up from family funds to the level they want. Any guidance that the trust has been set up to follow should be adhered to carefully. There would be a potential increase in the trust income if Eileen went into care as that house could be rented or it could be sold and the proceeds used to acquire higher yielding assets if that was felt to be appropriate and within the trust rules. I would not like to be a trustee and the adviser to a trust and would prefer to resign as trustee and engage as an adviser only. A full fact find and trust document would be required to properly examine the situation and ideally a view across the entire family so all options were considered." "Clearly in this case, his role as a trustee overides his involvment as an adviser. I would have thought his duty of care was to the trust and therefore to the lifetime tenant and remaindermen equally, rather than the trustees, even though they are one and the same. The trustees must act in accordance with the trust and perhaps if Philip feels he cannot act as both trustee and adviser due to the potential conflict and his minority position, this (his reasons) should be noted in writing and perhaps he should allow himself to be replaced as a trustee if the trust deed allows this." "My choice of C is based on the duty, as I understand it, of trustees to act with a legal and fiduciary duty first and foremost, and while morals, and therefore emotions play a part, they have to be quite forensic in how they discharge their financial responsibilities. Sad though this outcome might be, the trustees must look at all the potential beneficiaries." "in this case I would take the view that his first responsibility is as a trustee rather than as an adviser. The terms of the trust will determine the extent to which capital can be used and a wide range of options as to how care is funded will need to be examined, considered and recorded, and decisions made." "Philip has an obligation to take account of the intent of the deceased husband/father and guide the trustees towards a solution which would most closely reflect his likely wishes had he still been alive. Such a solution might involve the sale of the family home at some stage to ensure the ongoing funding of the cost of care for Eileen." "Missing information relevant to the problem: Exact number of Trustees There will be at least two others, as the article states that Philip 'could be outvoted'. Size of trust The total value of the family home and invested assets (depleted by work on the house). Possible conflict of interest The two residuary beneficiaries with children in 'expensive private education' – is either or both a trustee? Restraints in the Trust Deed regarding 'unfettered use' What is excluded, or does the Trust Deed specify exactly what IS permitted? Analysis of issues If the Trust Deed has constraints on how the funds may be spent, the trustees have to comply, or seek approval from the court to vary the terms of the trust. Unfortunately, a voluntary agreement from the life tenant and remaindermen is probably no longer possible, as the life tenant suffers from dementia, and may well lack mental capacity in this particular matter. In addition, the grandchildren in 'expensive private education' will probably still be minors. This, by itself, would prevent a voluntary variation being made. The cost of applying to the court would be extensive, and might even be ultra-vires depending on the actual restrictions in the Trust Deed if that counts as 'unfettered use' within the restrictions. However, the trustees' right to apply to the court is statutory, and this ought to override any trust provisions. Indeed, the court can strike down such a provision if it rules that the restriction is unsuitable as against public policy, or for whatever reason the court decides. Most importantly, if one or more of the trustees who may outvote Philip are those with children in private education they must immediately declare a conflict of interest as well as a direct pecuniary interest in the decision. This may (or should) disqualify them from outvoting Philip since they cannot demonstrate that their decision was made totally impartially. The option C reflects the actual course of action for Philip, but the additional issues mentioned above modify the action to a considerable degree." PrivateBody: === Title: Grey matters ethical dilemma: A sign of the times? StandFirst: Important documents are missing a witness signature. Holly, not the appointed witness, decides to sign them herself rather than disturb the witness at a time of grief. How should her manager respond? PublicBody: Holly works for a small firm of wealth managers, where she has been employed for several years. She supports Alex, an experienced manager in servicing clients' needs. Alex thinks highly of Holly, whom she regards as possessing all the requirements for becoming a manager before too long. Alex and the firm have helped their important clients, the Harris family, arrange their assets to reduce the impact of inheritance tax, including the setting up of various forms of trust arrangements. Regrettably, Mr Harris was diagnosed with cancer and although the initial prognosis was that he should live for several years, it soon became apparent that this was unlikely. Consequently, all his tax arrangements were reviewed, and Mr Harris was required to sign several documents. Alex asked Holly to ensure that this was achieved with as little disturbance of the Harris family as possible. The documents required not only the signature of all the trustees, but also that the signatures be witnessed, so it was a time-consuming process. Meanwhile, Holly learnt that her grandmother was also seriously ill. Holly was granted time off to go on what subsequently turned out to be her final visit, which she understandably found very upsetting. On returning to work after a brief period of grievance leave, Holly reviewed the Harris family documents and found that Mr Harris's signature was missing in one place, so she returned the documents for this to be completed. They were not returned for several days, and were accompanied by a note suggesting that, although he had been able to sign the documents, Mr Harris was now very close to death. Holly, being uncomfortably reminded of the recent loss of her grandmother, put the documents to one side. A further day passed before Holly once again reviewed the documentation, when she realised to her dismay that although Mr Harris's signatures were all complete, one of the other parties to the arrangement had not had their signature witnessed as required. Holly realised, to her dismay, one of the other parties had not had their signature witnessed Imagining the situation in the Harris family household, Holly wondered what she should do. She could not send the documents back at this time but, on the other hand, Mr Harris might die before they were fully complete and effective. Alex was on leave and not due to return to the office for another week, so Holly was unable to discuss the situation with her. Holly could see that the witness completed the rest of the form correctly and inserted their signature at other necessary points throughout. She therefore believed that the trustee's signature was witnessed properly, and the omission of the witness's signature on this page was an 'honest mistake'. She decided that as all the parties to the documents were known to her, at least to the extent that their signatures appear frequently on Harris family documents, she would sign her own name in the blank witness signature space and, in doing so, effectively act as a witness in this case. After all, she rationalised to herself, it was only the confirmation of the trustee's signature and what alternative did she have? She could not afford to delay matters, and had been given strict instructions to not upset Mr Harris or his family. Over the next few days, Holly wrestled with her conscience and decided that when Alex returned to the office, she would tell her what she had done and accept the consequences. Alex returned and met with Holly for a review of what had happened in her absence. Holly told her about the situation with Mr Harris, the difficulties that she had encountered in obtaining all the necessary signatures and reassured Alex that she had resolved them all, just in time, as sadly Mr Harris had passed away the previous day. Alex thanked her for what she had done, but then Holly, unable to contain herself any longer, explained that there had been a missing witness signature, and that she had inserted her own signature to confirm the authenticity of the original. How should Alex respond? Holly should be fired for gross misconduct. She was not a witness to the trustee's signature, and has therefore fraudulently inserted her own name in the documents. Alex should acknowledge that Holly was left in a tough position and did what she thought was right in the circumstances. However, she did make some serious mistakes, so should be required to undertake further training, and must have all her work strictly supervised for a set time. Holly clearly knows that her actions are wrong, and Alex trusts that she would not behave in this manner under normal circumstances. Furthermore, Alex realises that her own actions, including telling Holly to ensure the paperwork was completed with minimal disruption to the Harris family, and leaving her without supervision during a critical time, contributed to the issue arising. Therefore, she should not take any further action at this time. Holly should face disciplinary action, but the sanction should be short of dismissal, considering Alex's responsibility in the situation arising as well as the exceptional circumstances presented by this case. This dilemma appears in the Q2 2018 print edition of The Review, out soon. The CISI's opinion will be published in the Q3 2018 print edition of The Review. PrivateBody: === Title: Grey matters ethical dilemma: Gold digger – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the Q1 2018 print edition of The Review PublicBody: Read the dilemmaThis 'Grey matters', published in the Q1 2018 print edition of The Review, raises a tricky matter for a financial adviser, Karlie, who finds herself worried that one of her client's personal relationships may damage their financial security. Walking a balance between personal and professional relationships with clients often presents difficult dilemmas for professionals, and this is reflected in the variety of responses received. This dilemma was suggested by a CISI member – for which we offer our thanks. Should you wish to suggest dilemmas, please contact us at principles@cisi.org Options offered and results from survey A. Things change, and Karlie's concern is an overreaction. Jan is happy, and still has ample funds in her name. It would not be appropriate for Karlie to take any action at this stage. (5%) B. She should tell Jan that she is not prepared to give piecemeal advice, and that unless her access to the pension policy is reinstated she will have to stand down as a point of principle. (6%) C. She should insist on meeting with Jan alone when she has returned from holiday, and set out her concerns, including how marriage to Paul might affect the wishes she set out when she initially appointed Karlie as her adviser. (59%) D. Karlie should have realised that Jan's brain haemorrhage made her a vulnerable client all along. It is clear that Paul is now controlling her and, as Jan has no close family, in orderto safeguard her interests Karlie should report her concerns to the care authorities. (31%) The CISI verdict Most of the comments speak about the duty of care Karlie owes to Jan, but opinions differ about what form that should take. The most popular option is that Karlie speak to Jan alone (option C), which also gives Karlie the opportunity to establish whether her worries that Jan is a vulnerable client are founded. However, 31% of respondents say the information they have to hand is enough to identify Jan as a vulnerable client (option B), and that immediate steps should be taken. The signs that Jan is (and has been) a vulnerable client are compelling – she previously suffered a significant health problem, is widowed, recently appeared confused and forgetful, and is now making choices which seem incompatible with her goals. While waiting for a face-to-face discussion with Jan is an appealing option, Jan and Paul are meant to be away for several weeks, and the situation may escalate during that time. They may even get married. For this reason, it is recommended that steps are taken now to safeguard Jan's interests. The care authorities and/or Jan's remaining family should be informed of the situation, and Karlie should consider consulting with a compliance professional. Option D is the CISI's preferred option. Some reader comments "Karlie has previously been appointed by Jan as her adviser, therefore she should give Jan the benefit of her opinion in respect of her current situation as to how this has changed significantly and potentially 'out of character' from where their client/adviser relationship began." "Karlie should inform the police immediately and insist on seeing Jan alone. If I were her I would check my insurance policy asap in regard to negligence." "I don`t really like any of these options as they are all quite drastic. C is closest to my preferred approach – gently try to have a meeting with Jan alone to review her wishes and future plans – which Jan is entitled to change if she wishes. I do think that there is a vulnerability risk, but option D is too drastic at this stage without further information. Option B, again, would be walking way from the issue and I would prefer to make another attempt to discuss with Jan. At this point there's insufficient information to assess the risk of Jan being taken advantage of and more work is required." "Answer C appears to be the most appropriate, although I don't like the use of the word `insist`. However, given the long relationship with her and her deceased husband, the most appropriate route seems to be to have a conversation with her and see if her concerns have substance or if she considers she is a vulnerable client." "This is a rather tricky matter. I would suggest that she detail an appropriate report to management and consult her legal and compliance colleagues on both obligations and possible actions that can be taken if it is deemed fit by the firm. The loss of the business will happen if Jan passes on based on Paul's disposition so I don't feel that should concern Karlie. Duty of care, duty of care." "Agree that this is tricky. I would consider Jan to be a vulnerable client given that she is widowed and potentially still ill. Karlie should speak to her manager and the compliance officer about what has occurred so far. Karlie has a duty of care to do something." "While no direct action should be taken, the care authorities should be notified so they can make an informed decision on how to proceed. This is not in Karlie's remit to decide. However, by passing on her concerns to the care authorities, I feel she would have met her moral obligations without overstepping her bounds." "I have chosen option D, but option C should be a first step as Jan seems to be changed since meeting Paul. Jan's well-being is paramount, particularly if she is truly happy with her new marriage, that's fine. Jan might alternatively be upset and afraid and hiding that. She might also be relieved that Karlie is protecting Jan's interests and help her to resolve what she now might feel is a huge mistake that she cannot get out of. (I think Jan might confide in Karlie if that is so.) It's a very difficult situation. I also think that before she does anything, she should seek the guidance of the compliance team, who may need to take external legal advice to help them with how to approach this. It's a complex area. Karlie should set out the sequence of events clearly (with the evidence on file from earlier meetings and correspondence) and ask her compliance team. For me, the catalyst is Paul's attitude and that meeting in several weeks should proceed." "This is challenging as Karlie has to be careful about where the lines are drawn. From my response, B, I'd anticipate further discussions. Karlie has to advise her client appropriately." "Keep an eye on withdrawals from the investments and any change to the destination of funds. This might be done by alerting compliance unless Karlie is a sole trader and responsible herself for the duty of care. Soft skills will be required to talk to Jan about how she is feeling, and to come from the perspective of a friend and trusted adviser. Perhaps Karlie could extend this to get to know Paul and do a bit of research on him. An entry into this discussion might be to talk to Jan about who she might want to make health decisions for her in the event she is unable to, eg, if there was a relapse." "I would look at C first and then, depending on the results of that, I would consider option D." "Jan has to be treated as a vulnerable client and Karlie should have taken this into account much earlier in the process. Option D is the 'better late than never' option, but is the only one offering Jan any protection from Paul." PrivateBody: === Title: Grey matters ethical dilemma: World tour StandFirst: This 'Grey matters', about sexual harassment in the workplace, was originally published in The Review in July 2008 and updated and reworked for this edition. The rise of the #MeToo and #TimesUp movements have brought the topic to the forefront of public consciousness. Ten years on, would we recommend doing anything differently? PublicBody: Robert is managing director for an international retail bank. The bank has recently appointed a new non-executive director (NED), Henry. As part of his induction, Henry is undertaking a series of visits to the bank's overseas branches, accompanied by members of Robert's team. Robert liaises with colleagues overseas to ensure that Henry is introduced to appropriate staff members, local business leaders and government representatives. All the visits are high-profile, with a significant amount of press coverage. However, Robert is concerned at feedback he receives from members of his team who accompany Henry on his visits. During one long-haul journey, Henry had liberally enjoyed the refreshments available on the aircraft. The flight was followed by a large reception at which Henry met senior members of the bank's local staff, business leaders and several government representatives. Robert's team member, Stephanie, tells him that Henry continued drinking at the reception, which, compounded by his earlier indulgence, resulted in him slurring his words. Additionally, he seemed to be concentrating heavily on entertaining the female guests, including Stephanie, who were made to feel uncomfortable by his close attention. A further incident was reported to Robert by an overseas colleague, Mark, who attended a reception for Henry, at which he conspicuously pestered a female guest, one of Mark's valued clients, to go out to dinner. The client told Mark that she accepted the dinner invitation only to avoid causing a scene and that she was not happy about it, suggesting that she was unsure whether she wanted to remain a client. He seemed to be concentrating heavily on entertaining the female guests These two incidents concern Robert for many reasons, including their potential to reflect badly on the bank, and the possibility of legal action. Accordingly, he feels that they must be reported, and makes an appointment to see the chief executive. The chief executive tells Robert that, while he has done the right thing in speaking up, he does not feel inclined to take it any further. Robert feels as though he has done everything possible at this stage to take appropriate action, and advises Stephanie and Mark that the incidents have been reported. A month later, following a further overseas trip during which Henry was again accompanied by Stephanie, she returns and tells Robert that Henry made several suggestive remarks to her. She is very upset and says that unless something is done about it she will feel compelled to speak up using any channels available to her, including social media. Robert assures Stephanie that he will see that something is done but, having reported previous incidents to the chief executive to no avail, privately he wonders what more he can do. The chief executive is currently with Henry on one of his overseas visits (which is being covered heavily in the press), and Robert is hesitant to approach him again until he is back in the office in a couple of weeks. What should Robert do? Go back to the chief executive once he returns to the office, even though this could mean that Henry's bad behaviour continues unchecked on the current visit. Let Stephanie know what he plans to do, and encourage her to not say anything publicly until he has had a chance to speak with the chief executive again. Report the matter to the HR director as the senior staff member for personnel issues, which this has now become. Let the HR director know that the matter has been reported to the chief executive, but that nothing (to his knowledge) has been done. Report his concerns to the chairman, and advise the chairman of the previous report to the chief executive. The chairman is, after all, the only person who has the power to dismiss a NED. Email the chief executive while he is away, letting him know that another report has been received about Henry's unacceptable behaviour, and that if nothing is done, the staff member concerned will almost certainly make her accusations public on social media. PrivateBody: === Title: Grey matters ethical dilemma: A sign of the times? – the verdict StandFirst: Read the CISI's verdict on the ethical dilemma that appears in the Q2 2018 edition of The Review PublicBody: Read 'Grey matters ethical dilemma: Sign of the times' from the Q2 2018 print edition of The Review. Voting is now closedThis 'Grey matters', published in the Q2 2018 print edition of The Review, deals with familiar issues, including grief and stress, and a lack of support at a time when a crucial decision must be made. Many will empathise with Holly's situation, where she finds herself doing something wrong, but with the best of intentions. This dilemma was inspired by real-life events, as told to us by a CISI member, for which we offer our thanks. Should you wish to suggest dilemmas, please contact us at principles@cisi.org Suggested solutions and results are as follows: Holly should be fired for gross misconduct. She was not a witness to the trustee's signature, and has therefore fraudulently inserted her own name in the document. (15%) Alex should acknowledge that Holly was left in a tough position and did what she thought was right in the circumstances. However, she did make some serious mistakes, so should be required to undertake further training, and must have all her work strictly supervised for a set time. (26%) Holly clearly knows that her actions are wrong, and Alex trusts that she would not behave in this manner under normal circumstances. Furthermore, Alex realises that her own actions, including telling Holly to ensure the paperwork was completed with minimal disruption to the Harris family and leaving her without supervision during a critical time, contributed to the issue arising. Therefore, she should not take any further action at this time. (15%) Holly should face disciplinary action, but the sanction should be short of dismissal, considering Alex's responsibility in the situation arising as well as the exceptional circumstances presented by this case. (44%) Responses received: 266 The percentages shown above and the number of responses differ slightly to those in the print edition, because voting was closed after the magazine went to print. The CISI verdict What Holly did is, essentially, fraud. She signed a document as a witness, despite having not actually witnessed the trustee's signature. However, ethical dilemmas are never 'black or white'. Holly was told by her manager, Alex, to ensure that the documents be signed with as little disturbance to the Harris family as possible, and Holly wanted to honour this, especially since she had recently suffered a bereavement as well. Therefore, many comments note that while Holly's actions were wrong, her intentions were good. While the majority of the respondents opted for Holly facing disciplinary action, it was felt that mitigating circumstances should mean any sanction should fall short of dismissal. The CISI's recommended option is in line with this. Holly should be held accountable for her actions, but those actions should be considered in line with her intentions and the situation she found herself in. Selection of comments "Clearly, this is a serious situation, which should involve disciplinary steps. While one might need legal input/advice on the fraud, it appears that one needs to consider "with intent to make a gain for himself or another, to cause loss to another or to expose another to risk of loss". Based on the information provided, it appears that Holly's underlying intent was to avoid troubling persons at a very difficult time. On balance therefore, and while Holly was wrong to act as she did, summary dismissal appears a little excessive. While it is not directly material to the ethical question at hand, it may be possible to mitigate the inappropriate signature by having this re-witnessed, then removing the risk of any harm to the clients." "Ultimately, Holly was just trying to help the family at a difficult time. Clearly, she realises that what she did was wrong, but it wasn't in any way fraudulent. I would imagine it would be possible to get the document witnessed retrospectively? I feel that Holly should be reprimanded and undergo further training, but to dismiss her summarily would seem overly harsh." "First, Alex must report the whole affair to her own superior and the compliance function within the firm. As Alex has to some extent contributed to the position in which Holly finds herself, she cannot be the final authority on what should be done. Holly is able and will learn from this episode if allowed to continue her career. Justice and mercy are both relevant here." "The key issue is intent – there was no malintent, or desire not to act in the customer's best interest. Her actions need to be judged in the context of her level of seniority and the position she was placed in due to the explicit instructions of her superior, who bears ultimate responsibility for creating the conflict she experienced. She was trapped either way – disobeying regulations or disobeying her superior." "Alex should also face some disciplinary action, along with Holly." "Holly did not actually witness the signature but she was familiar with it and could recognise it as authentic. Although she was wrong to apply her signature as witness, there was some reasonability in making the assumption that there was an inadvertent omission of the signature on that particular page, given that it had been applied to all the others. Holly also has a level of experience, having worked there for a number of years, so that further supervision would not necessarily be the solution. A sanction is definitely warranted for Holly by Alex." PrivateBody: === Title: Grey matters ethical dilemma: Knowing your clients too well? StandFirst: A lack of IT experience among staff at Financial Planning XYZ has led to a new app unexpectedly collecting customer data from their devices. Does this constitute a data breach, and what should Danni, the CEO, do next? PublicBody: Danni is the founder and CEO of Financial Planning XYZ. She has always been adamant that knowing her customers is the key to her success, and it seems to have paid off. She now employs 56 staff members over three offices in Birmingham, Liverpool and Manchester, with more than 400 clients. Every year, Financial Planning XYZ conducts a customer satisfaction survey. In previous years, surveys have been sent out by post, and clients have returned them anonymously. However, Danni and her executive team, consisting of the heads of the three offices, finance director and HR director, agree the business needs to modernise, and decide to develop an app which their customers can use to complete the survey and submit feedback. Start-up firm, Easy as ABC, which specialises in creating apps for small businesses, is appointed to build the app. The most attractive part of their pitch was their simple 'back-end' platform, which they promise is simple enough for even a tech novice to use to edit content. Development progresses quickly, and Danni and her team are pleased with its intuitiveness for clients, its simple system interface, and especially its functionality of downloading survey responses directly onto the Financial Planning XYZ servers. Once development and testing are complete, control of the app is handed over to Financial Planning XYZ, to finalise and input the customer survey questions. Meanwhile, most of the staff at Financial Planning XYZ are busy preparing for the implementation of General Data Protection Regulation. So, the head of HR, Mike, suggests hiring an intern to assist with the app launch. This is agreed, and Sam is hired for a month. He is young, enthusiastic, and reassures Mike that he knows exactly what is needed, having assisted with similar data collection via an app before. Not only are the responses not anonymous, but each client's response has been downloaded, in full, into their files The app launch goes better than expected, and responses from customers start pouring in. But Danni is confused when Sam approaches her and asks what he should do with a couple of specific questions that have been received from Mr Smith. Danni asks how he knows the questions were submitted by Mr Smith, and Sam replies that the information has been saved straight into Mr Smith's folder. Danni is worried, and investigates further. She is dismayed by what she finds – not only are the responses not anonymous, but each client's response has been downloaded, in full, into their files. Furthermore, some clients have clicked 'yes' to a standard pop-up asking if the app could access their camera role, contacts, and location services, and therefore some personal data has also been stored in their folders. Easy as ABC explains to Danni that the download functionality was built in because they were told it was for a customer satisfaction survey, but this needed to be activated in the back end. It transpires that Sam, put in charge of inputting the survey questions, had selected to collect the full amount of data after Mike told him how important it was at Financial Planning XYZ to know as much as possible about their clients. None of the clients have complained about being asked for permission to access their camera roll and location services. Although the app never said that the survey was anonymous, there was an option at the end to leave your name. Some clients did so, but most did not. Additionally, some clients clicked 'yes' to the pop-up but did not leave their name, and vice versa. How should the firm handle this dilemma? All the data collected by the app should be deleted. A message should be sent to the clients from Danni noting that there was an unexpected technical glitch, no erroneous data will be retained, and that clients should delete the app from their devices. The survey questions should be sent out again by post. Each client must be informed immediately about exactly what data has been accessed. These responses should be tailored to each client, especially for those who clicked 'yes' to the pop-up, therefore giving consent for the app to access their wider personal information. All personal data should be deleted, even if the client consented to the pop-up request, but the responses from the survey questions can be kept in the client folders, especially since it can be used to improve customer service and fix small problems experienced by individual clients. The responses to the survey should by anonymised by deleting names and moving information from client folders into a central 'survey' folder. Where consent was given, some personal information, such as location, obtained by the app can be used. However, the information should only be used for its intended purpose, and its use should be reasonable and proportionate, and any unnecessary information should be deleted. This dilemma appears in the Q4 2018 edition of The Review. The results of the survey and the opinion of the CISI will be published in the Q1 2019 print edition of The Review. All members, excluding student members, are eligible to receive the quarterly print edition of the magazine. Members can opt in to receive the print edition by logging in to MyCISI, clicking on My account, then clicking the Communications tab and selecting 'Yes'. PrivateBody: === Title: Grey matters ethical dilemma: World tour – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the Q3 2018 print edition of The Review PublicBody: Read the Q3 2018 dilemma This 'Grey matter', about sexual harassment in the workplace, was originally published in The Review in July 2008, and updated and reworked for the Q3 2018 print edition. With the rise of #MeToo and #TimesUp movements, CISI asked members to consider whether they would recommend doing things differently. Suggested solutions and results Go back to the chief executive once he returns to the office, even though this could mean that Henry's bad behaviour continues unchecked on the current visit. Let Stephanie know what he plans to do, and encourage her to not say anything publicly until he has had a chance to speak with the chief executive again. (7%) Report the matter to the HR director as the senior staff member for personnel issues, which this has now become. Let the HR director know that the matter has been reported to the chief executive, but that nothing (to his knowledge) has been done. (58%) Report his concerns to the chairman, and advise the chairman of the previous report to the chief executive. The chairman is, after all, the only person who has the power to dismiss a NED. (19%) Email the chief executive while he is away, letting him know that another report has been received about Henry's unacceptable behaviour, and that if nothing is done, the staff member concerned will almost certainly make her accusations public on social media. (16%) Responses received: 221 The CISI verdict The majority of respondents recommended taking direct and urgent action (2), informing HR of the inappropriate behaviour exhibited by the recently appointed NED, despite the fact that doing so would expose the CEO for not taking the matter further. In fact, one respondent recommended going further, stating "I would let Stephanie know what I had done, and also email the chief executive to tell him that I had made a report to HR and that Stephanie had been offended." The second most popular option (3) also involved escalation. Given the current focus on inappropriate behaviour and harassment in the workplace, it is heartening that respondents to this dilemma recognise the importance of escalating these matters, and that the majority chose options which would best support the victim. Of course, the CISI wants employees to feel safe at work, and not be exposed to inappropriate or threatening behaviour. However, should a situation like this occur, the CISI agrees with the majority and recommends reporting the issue to HR at the earliest possible opportunity. Selection of comments "Under the SMCR there is no option but to report these behaviours to the HR director, who carries full responsibility for resolving these matters. Alcohol abuse and sexual harassment are unexploded time bombs in any organisation, even more so in a regulated environment. The HR director should assemble the facts/witness statements in a discreet manner and then write a memo to both the CEO and the chairman. In doing so, the HR director must ensure that the whistleblowers are completely protected from any repercussions. The sooner the NED leaves the board, the better for the firm." "Interesting that for the purpose of the dilemma, the age old stereotype of the male being the one who behaves inappropriately remains unchanged." "HR should always be aware of incidents such as this and should have been copied in on the original conversation with the CEO." "I chose option 2, but would have done more than this. I would have let Stephanie know what I had done, and also emailed the chief executive to tell him that I had made a report to HR and that Stephanie had been offended by the behaviour." Should you wish to suggest dilemmas for future editions, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: In his shoes StandFirst: Allegations of bullying have been made against the CEO of a family-run asset management firm. The head of HR must choose between the effective management of the company and causing trouble within his own family PublicBody: Footes & Co is a privately run boutique asset management firm, founded by John Footes in the 19th century. Ownership of the firm has been passed down through the Footes family ever since. The firm has a set of core values, established by John Footes, which are: Respect; Integrity; Customer Care; and Honesty (RICH). All staff members, including the family members who sit on the Board and within the management team, are expected to abide by these values by 'walking the walk' and not just 'talking the talk'. PrivateBody: Footes & Co is a privately run boutique asset management firm, founded by John Footes in the 19th century. Ownership of the firm has been passed down through the Footes family ever since. The firm has a set of core values, established by John Footes, which are: Respect; Integrity; Customer Care; and Honesty (RICH). All staff members, including the family members who sit on the Board and within the management team, are expected to abide by these values by 'walking the walk' and not just 'talking the talk'. Mike Footes, the son of John Footes III (the current chairman of Footes & Co), pursued a career outside the firm after graduating from university. Determined to forge his own path, he joined a rival asset management firm, causing a rift in the family. During his 30s, the tension became so bad that he did not speak to his father for a number of years, until the rift was healed when Mike married and had two children. Step by step, the relationship improved, and John was impressed when Mike told him about his professional successes, rising through the ranks at the firm in which he worked, finally being promoted to managing director. Mike's mother, Janine, often tried to press him for further details about his job, but Mike remained evasive. Janine was not concerned, believing Mike was being careful to avoid another fall out with his father. In 2016, the Footes & Co chief executive Sheryl Brogues (not a member of the Footes family) decided to stand down from her post. To John's delight, Mike informed him that he would be interested in the role and John used his influence as chairman of the Board to fast-track Mike's application. While there were other applicants, it was seen as a foregone conclusion that Mike would step into the role. Richard Footes, head of HR, did his best to remain impartial during the recruitment process (which was difficult, as Mike is his cousin), but in the end he determined that Mike's impressive résumé and excellent interview marked him apart from the other candidates, and he was appointed as the new chief executive of Footes & Co. Mike had been particularly aggressive in a meeting, and had shouted at a junior staff member who had disagreed with him The family was delighted to have Mike join the firm, and a couple of years passed without incident. Mike was known for his strong leadership style, and he would often dominate meetings, yet this was just seen as his way of achieving results. However, in 2018 a complaint was made against Mike by a fellow member of the management team, saying that Mike had been particularly aggressive in a meeting, and that he had shouted at a junior staff member who had disagreed with him. The complaint centred around the fact that this behaviour was not in keeping with the firm's RICH values (particularly the value of Respect). An investigation was launched, and Mike extended an apology, which was accepted, and the matter was considered closed. However, over the next few months, staff morale at the firm sharply declined, and a couple of key staff members (not part of the Footes family) decided to leave. In her exit interview, Lisa, formerly head of compliance, mentioned to Richard Footes, head of HR, that Mike was a bully. She said he was known for his coarse language and aggressive behaviour, and that these traits were not consistent with the firm's RICH values. However, she also mentioned that staff were scared to raise concerns, especially if they were not members of the Footes family. Lisa asked Richard to keep their conversation confidential, saying: "I only told you this because I trust you. I'm sorry for putting you in a difficult position, as I would not want to be in your shoes." Richard recognises that he is in a difficult position. He is part of the Footes family and doesn't want to upset the relationship between Mike and his father that was only restored a few years ago. However, if Mike's behaviour is really that bad, it has the potential to affect the business and, with it, the family. What should Richard do? Conduct further investigation, including reviewing the references received from Mike's previous employer and seeking witness statements from members of staff who might be willing to go on record about Mike's behaviour. Report his concerns to the chairman (John Footes III, Mike's father), which is consistent with the guidance set out in the firm's whistleblowing policy. Do as Lisa asked and keep the information confidential. He cannot take further action until more information comes to light about Mike, and exposing Lisa would be a breach of the trust she has placed in him. Call Mike in to answer allegations of poor conduct that goes against the RICH values. === Title: Grey matters ethical dilemma: Knowing your clients too well – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the Q4 2018 print edition of The Review PublicBody: Read the Q4 2018 dilemma This 'Grey matter', published in the Q4 2018 print edition of The Review, looks at what happens when a lack of understanding about new technology leads to unexpected problems. Suggested solutions and results All the data collected by the app should be deleted, and a message sent to clients noting that there was an unexpected technical glitch, no erroneous data will be retained, and that clients should delete the app. The survey questions should be sent out again by post. (19%) Each client must be informed immediately about exactly what data has been accessed. These responses should be tailored to each client, especially for those who clicked 'yes' to the pop-up, therefore giving consent for the app to access their wider personal information. (29%) All personal data should be deleted, even if the client consented to the pop-up request, but the responses from the survey questions can be kept in the client folders, especially since they can be used to improve customer service and fix small problems. (4%) The responses to the survey should be anonymised. Where consent was given, some personal information obtained by the app can be used. However, the information should only be used for its intended purpose, and its use should be reasonable and proportionate. Any unnecessary information should be deleted. (48%) Responses received: 248 The CISI verdict With the launch of the EU General Data Protection Regulation in May 2018, the use and collection of customer data is a key consideration for many businesses. The key issues in this case are a) it is unclear whether clients realised their responses were not anonymous and b) some irrelevant data has unintentionally been collected. The most popular choice is option D, but if there's any confusion about what clients have agreed to, they must be told what information of theirs has been accessed. Option B is also not appropriate because, as one respondent said: "Option B … involves identifying the personal information accessed, [and] is much more likely to compromise confidentiality than option A." Our recommended option (option A) is in line with this. It is too complicated to separate which clients consented to their response being attributed to them and which clients consented to the app accessing information from their phone. Additionally, this exercise would most likely narrow down the groups of respondents so much that it would be possible to identify responses provided by individual clients. Should you wish to suggest dilemmas for future editions, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Continuing professional dishonesty StandFirst: A CISI Chartered member suspects that his manager, also a Chartered MCSI, is claiming CPD for events at which she has not remained for the duration. However, there is no question about her competence or capability. What, if anything, should he do? PublicBody: Chris is an investment manager at Hardworking Investments, and has worked there for four years. When he started in financial services, he worked hard to attain his CISI qualifications, and has worked his way up to Chartered MCSI. Chris takes completing his continuing professional development (CPD) requirements very seriously, and regularly attends training sessions organised by Hardworking Investments. Monica is head of investments (an FCA certification function) at the firm. She joined Hardworking Investments in the previous year, and her arrival was much anticipated, as she is known to be one of the smartest and most knowledgeable professionals around. Since starting her job, she has lived up to this reputation – speaking with authority on a variety of topics, ranging from technical expertise to regulatory updates, as well as soft skills, such as leadership and listening skills. Chris, along with his colleagues, is impressed and eager to learn a lot from the new head of their department. For that reason, Chris decides to attend many of the same CPD sessions as Monica, anticipating that even if she is not on the panel or delivering the training, she will ask insightful and interesting questions which he can learn from. However, after attending a few of the same training sessions as Monica, Chris starts to recognise a pattern. Monica is usually already in the room when Chris arrives, deep in conversation with the trainer or speakers. Chris overhears her on several occasions asking the speakers about the key points they plan on covering in the session, which at first he thinks is entirely appropriate – she is a senior manager, after all, and he assumes she wants the opportunity to ask them some specialist questions before the rest of the attendees arrive. However, Monica then prefers to sit near the back of the room near the door, and Chris notes that she usually leaves the sessions after around 15 minutes – slipping away with an apologetic smile to the event organiser. In meetings, Chris has noticed that – when asked about upcoming trends or updates – Monica just tends to repeat the information she gleans from speakers before events without giving too much additional detail, and passing off any interesting insights as her own. Nevertheless, on other occasions Monica comes up with original solutions to problems, and is clearly very knowledgeable about technical subject matters. She usually leaves the sessions after around 15 minutes Hardworking Investments gauges attendance at CPD events through the use of a sign-in sheet, which employees can sign either at the start or end of the training sessions. If attendees are CISI members, Joe – Hardworking Investment's learning and development assistant ­– then logs into the CISI 'Super user' page to load members' attendance into their CISI MyCPD logs. Chris has witnessed Monica adding her name to the sign-in sheet at the start of sessions, before leaving early. He is aware that, like him, Monica is a Chartered MCSI, but she does not attend many CISI CPD sessions – preferring to attend the ones offered internally. When he has seen her at CISI events, she has stayed for the duration of the talk. Chris wonders if Monica is aware that she is automatically being awarded an hour of CPD for each of the Hardworking Investments training sessions she attends, even if she only stays for around 15 minutes. When he is feeling particularly suspicious, he wonders whether Monica is being deliberately dishonest, but usually dismisses these feelings on the basis that Monica is a well-liked and respected person, and that she is clearly knowledgeable and has the skills to do her job at a high level. What should Chris do? Speak to Joe, and establish if Monica lets him know when she has had to leave training sessions early. If she does not, Chris should inform the learning and development manager that Monica has been leaving internal CPD training sessions early. He should do nothing – this is not his responsibility and Monica is responsible for her own learning and development. Besides, everyone has busy periods where they are unable to dedicate huge amounts of time to attend training sessions. Report his suspicions to the CISI, as they may add Monica to their next CPD audit. Approach Monica and indirectly enquire about her CPD (eg, "I had to leave a CPD session early last week, do I need to let anyone know?"), hoping that this will lead to a change in behaviour or perhaps even an explanation. This dilemma appears in the July 2019 print edition of The Review, out soon. The CISI's opinion will be published in the Q3 2019 print edition of The Review. PrivateBody: === Title: Grey matters ethical dilemma: In his shoes – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the Q1 2019 print edition of The Review PublicBody: Read the Q1 2019 dilemma This Grey Matter, published in the Q1 2019 print edition of The Review, presents a dilemma for a head of HR, who is faced with how to manage allegations of bullying behaviour against the CEO of a family-run asset management firm. Suggested solutions and results Conduct further investigation, including reviewing the references received from Mike's previous employer and seeking witness statements from members of staff that might be willing to go on record about Mike's behaviour. (46%) Report his concerns to the chairman (John Footes III, Mike's father), which is consistent with the guidance set out in the firm's whistleblowing policy. (48%) Do as Lisa asked and keep the information confidential. He cannot take further action until more information comes to light about Mike, and exposing Lisa would be a breach of the trust she has placed in him. (2%) Call Mike in to answer allegations of poor conduct that goes against the RICH values. (4%) Responses received: 397 The CISI verdict Unusually, this dilemma split opinion between two of the suggested solutions – conducting further investigation (option 1) and reporting to the chairman in line with the whistleblowing policy (option 2). Both options have pros and cons. Further investigation may elicit information that Richard could present to the chairman – thereby protecting Lisa's identity. However, Richard may still be asked about what prompted him to investigate now – years after Mike joined the firm – which may require him to reveal the tip-off. Furthermore, one respondent noted: "given Mike's character and dominance at his previous firm, it is likely that potential whistleblowers will be afraid to speak up". A number of commenters stated if the firm has procedures in place for reporting, these should be followed (option 2). However, John's ability to remain impartial was questioned by one respondent. Our recommended option reflects a number of suggested solutions. Richard should review all the information available, including references supplied when Mike joined the firm and exit interviews given by staff who have left since Mike became CEO. However, it would be inappropriate to seek out new information at this stage. Instead, he should present the available information to John. Richard could suggest that John recuse himself from investigating his own son's conduct, not only because if he were involved it may further damage their relationship, but because appointing someone else (ideally, someone outside of the Footes family) to oversee the process would ensure impartiality and fairness. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Jane Doe StandFirst: When a firm replaces an employee with a chatbot, at first clients don't notice the difference. But when things start to go wrong, senior managers must decide what to tell clients and the regulator PublicBody: Jane has worked as a customer services administrator for Identity Finance, a medium-sized wealth management firm, for five years. The job is a step-down for Jane, who had previously been head of customer relations at a prestigious firm, but, at 64 years old, she had wanted to take on a less taxing role before she retired. Nevertheless, because of her experience and reputation for excellent customer service, Jane receives a higher than average salary. Jane's job involves liaising with clients via email and phone – everything from booking appointments to managing complaints. Over the years, clients have come to trust and rely on Jane, and she takes her responsibility as a brand ambassador seriously. Knowing that Jane wishes to retire before turning 70, senior management at Identity task Sammy, the head of operations, with finding a solution for when she leaves. They cannot afford to hire another person of Jane's calibre and sterling reputation, so Sammy looks for alternatives, one of which is a new chat software run by AI Made Simple. AI Made Simple's director of development assures Sammy that the service its 'chatbot' function offers is as good as the real thing and that it can 'learn' Jane's tone and preferred language, thereby providing a seamless transition for when Jane retires. Clients say that Jane is unreliable, rude and dismissive Sammy presents the idea of a chatbot to the Board, saying that it will not only replace Jane, but will also be cheaper, and will streamline all client communications, including messaging via a chatbot on the company's website. The software can chat to more than one client at a time and will record all client satisfaction data, plus information about the types of queries received, response time, and how the problems are resolved. The chair of the Board is impressed, but some members express reservations about moving to AI. They cite the trust the clients have in Jane and wonder whether they will be happy speaking to a robot instead. The Board advises Sammy to ensure a smooth transition to the new programme and comes up with the idea of calling the bot Jane so clients don't notice any difference in the service. The software is added to the firm's system and starts to learn from human Jane. AI Made Simple call this a digital handover, whereby the system can learn to replicate her turns of phrase and tone. Jane's picture, with a friendly greeting message, is added to the chat function. Jane agrees to this, as she is eager to ensure a smooth transition for the clients after she retires. Jane's last day arrives, and she is bid a heartfelt farewell. The next day, Jane the bot takes over. The launch seems to go well, with Jane proving to be efficient and helpful for clients. Nobody seems to notice they are talking to a robot. A couple of months later, however, several complaints are received by Alfie, the head of client services, about Jane. Clients say that Jane is unreliable, does not properly respond to their queries, and seems rude and dismissive. Unaware that they have been speaking to a chatbot, clients ruefully ask Alfie to take disciplinary action against Jane. Alfie apologises to the clients, informs them that the matter will be dealt with, and contacts AI Made Simple, who adjust the software to fix the problems. At its next meeting, the Board reviews the usual papers, which include information about the number of complaints received. Company policy states that complaints about staff members must be escalated to the FCA. However, despite the numerous complaints about Jane, the paperwork says that none have been received or reported to the regulator. Alfie explains that because Jane is a computer programme, it does not fall under the category of staff member. What should the chair recommend? If the firm does not wish to escalate complaints about an AI programme to the regulator, the complaints should be assigned to Sammy, the person responsible for finding and implementing the programme, or to Alfie, the head of client services, and escalated to the FCA. The chatbot should be amended to inform clients that they are talking to a robot. However, Alfie has dealt with the complaints to the satisfaction of the clients, so the FCA need not be informed on this occasion. All clients should be written to, informing them that for the past two months, they have not been speaking with Jane, but with a robot. A message will be put on the website noting that the Jane programme has been running for two months, and it will be made clear on all future communications that clients are speaking with a robot. The complaints will be logged, in case of a visit by an FCA supervisor. Jane is clearly a liability. This is a failed experiment, and the company should either stop using the programme, or hire a junior client services administrator to work alongside the bot, and monitor responses. This dilemma appears in the October 2019 print edition of The Review, out soon. The CISI's opinion will be published in the Q4 2019 print edition of The Review. PrivateBody: === Title: Grey matters ethical dilemma: Continuing professional dishonesty – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the July 2019 print edition of The Review PublicBody: Read the July 2019 dilemma This Grey Matter, published in the July 2019 print edition of The Review, presents a dilemma for a CISI Chartered member, Chris, who suspects that his manager, also a Chartered MCSI, is claiming CPD for events at which she has not remained for the duration. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact ethics@cisi.org. Suggested solutions and results Speak to Joe, and establish if Monica lets him know when she has had to leave training sessions early. If she does not, Chris should inform the learning and development manager that Monica has been leaving internal CPD training sessions early. (57%) He should do nothing – this is not his responsibility and Monica is responsible for her own learning and development. Besides, everyone has busy periods where they are unable to dedicate huge amounts of time to attend training sessions. (5%) Report his suspicions to the CISI, as they may add Monica to their next CPD audit. (18%) Approach Monica and indirectly enquire about her CPD (eg, "I had to leave a CPD session early last week, do I need to let anyone know?"), hoping that this will lead to a change in behaviour or perhaps even an explanation. (20%) Responses received: 427 The CISI verdict Chris has found himself in an awkward situation, where his position as a CISI member and an employee of Hardworking Investments (in particular, as a member of the Investments Team led by Monica) seem to be in conflict. Option 4, the second most popular solution, allows Chris to gather further information from Monica before taking action. However, as one commenter astutely points out, it may lead to further trouble as "he's going to have to lie to Monica about leaving a session early, or actually leave a session early to be able to tell the truth to Monica about doing so". The CISI's CPD auditing system relies on trust, as individuals and firms upload and verify CPD records and attendance in accordance with the CISI's motto 'My Word is My Bond'. However, some commenters recognise that the weakness in a firm's internal attendance logging leaves the system open to manipulation, and could be tightened up in order to reduce actual or perceived misconduct. For that reason, our recommended option is Option 1. Should it be established that Monica has deliberately claimed CPD for events which she did not attend in full, the firm should report this to CISI so further enquiries can be made, which may result in disciplinary investigation. Selection of comments "I believe that it is Joe's competence as attendance taker that is in question as he is logging attendance as internal training. Chris has identified a control issue and the solution might be an entry and exit sign off or quiz if taking the subtle approach. Weakness is in Human Resources." "Option 1. Without speaking to Joe, Chris has no idea whether or not Joe is logging Monica's attendance. Monica may only be 'making an appearance' to support the events and looking after her own CPD independently." "Option 1 seems a bit big-brotherish to me; option 4 more subtle." "I agree that option 4 is OK as the first step: at the moment Chris has no idea whether or not Monica is doing anything wrong. She may have already told Joe she was leaving early and might not have claimed CPD hours. If, after talking with Monica, he's more sure she hasn't told Joe, then option 1. I also agree with the previous comment that this is an HR weakness, so maybe the approach ought to be to make HR aware that their process is open to abuse and suggest they tighten it up." "I'd be inclined toward a combination of 4 and 1, in that order. Engage with and give Monica the opportunity to confirm that she has been requesting Joe and HR to reduce CPD credits to .25 hour for the shortened classes she has been attending. (She may well have been). Regardless of her reply, I would also follow through with Joe and HR directly to request confirmation whether anyone had been advising/requesting reduced credits for partial attendance. If it became apparent that Monica had been dishonest, I'd call her out directly and suggest she reconcile the matter with HR directly, or that I would do so on her behalf." "Option 1. If he goes for option 4 (the only other realistic choice) he´s going to have to lie to Monica about leaving a session early or actually leave a session early to be able to tell the truth to Monica about doing so." Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Jane Doe – the verdict StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the October 2019 print edition of The Review PublicBody: Read the October 2019 dilemma This Grey Matter, published in the October 2019 print edition of The Review, presents a dilemma that arises when a firm replaces an employee with a chatbot. When things start to go wrong, senior managers must decide what to tell clients and the regulator. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org. Suggested solutions and results If the firm does not wish to escalate complaints about an AI programme to the regulator, the complaints should be assigned to Sammy, the person responsible for finding and implementing the programme, or to Alfie, the head of client services, and escalated to the FCA. (14%) The chatbot should be amended to inform clients that they are talking to a robot. However, Alfie has dealt with the complaints to the satisfaction of the clients, so the FCA need not be informed on this occasion. (9%) All clients should be written to, informing them that for the past two months, they have not been speaking with Jane, but with a robot. A message will be put on the website noting that the Jane programme has been running for two months, and it will be made clear on all future communications that clients are speaking with a robot. The complaints will be logged, in case of a visit by an FCA supervisor. (68%) Jane is clearly a liability. This is a failed experiment, and the company should either stop using the programme, or hire a junior client services administrator to work alongside the bot, and monitor responses. (9%) Responses received: 403 The CISI verdict This dilemma highlights some difficulties associated with the increasing use of AI and chatbots. A key principle to remember is, just because clients are interacting with a bot, it does not mean company/professional values can be disregarded. In this case, Identity Finance should have been mindful of the values of honesty and transparency, which the CISI defines as follows: Honesty: Have I been truthful about my action or decision … and told no lies or 'half-truths'? Transparency: Have I been clear and not misleading to any party involved? The CISI Code of Conduct also sets out that professionals within financial services should comply with regulations and the law in both letter and spirit, which one reader astutely observed was a consideration within this dilemma: "By arguing that the chatbot is a program and not an employee, the firm is complying with the letter of its policy, but not the spirit." Our recommended solution is option 3, as it best encompasses the values set out by the Institute of honesty, openness, transparency and fairness. Many respondents in the comments also suggest a mixture of all four options. Selection of comments "I would lean towards a mix of all four answers. By arguing that the chatbot is a program and not an employee, the firm is complying with the letter of its policy, but not the spirit. Clearly the policy is intended to ensure that the FCA is made aware of dissatisfied customers as a result of actions taken by the firm. In that respect, a human should be 'assigned' the complaints attributed to Jane. Equally, clients must be informed that the chatbot is indeed a bot – particularly as it carries human Jane's name and photo. Whether that needs to be retrospectively communicated to all clients is less clear cut – I would lean towards ensuring that going forwards, the bot is clearly labelled as such, but also to address this clearly in the response to any complaints that have been previously raised. Finally, the chatbot is a software tool that can act as a 'first line of defence' in handling customer queries – from a best practice perspective this should allow for escalation, monitoring and intervention by a 'second line', which in this instance should certainly be a human employee of the firm." "Someone in the firm has to be responsible for the actions/responses from the chatbot. I also feel that clients should be advised they are dealing with a robot and provided with an option to escalate to Alfie, if required." "This is a serious ethical situation and one that institutions will face in varying forms over the next few days, weeks, months and years. Three things to consider are: 1) The Board was apprehensive and allowed cost to rule the day when they worried about this very outcome. Oversight will be questioned by the FCA once this comes to light. 2)The use of Jane's tone and facial features can be considered as misleading, especially as it wasn't declared. 3) Having written policies that aren't implemented speaks volumes about ethics and standards. At the least, a report or call to the FCA based on their internal policy should have been pushed by either the Board or senior management." "Elements of all the options apply. By not disclosing that Jane is a chatbot, the firm has not been open with customers. If a chatbot is to be used going forward, it should only be used as a first stage, particularly if clients are making complaints. Every client should hear that they are about to speak to a bot – and be given the opportunity to speak to a human. I also think any client who has complained about Jane should be told the truth and that the system is being altered. Finally the complaints need to be recorded – possibly as complaints about the firm's systems." "Although option 3 is the one with the most relevance, I would also point out that the apology by Alfie, informing them that "the matter will be dealt with" is effectively a lie by omission. By not revealing the full nature of the matter which caused the clients to complain in the first place, he is, in fact, continuing to conceal the source of the client issues in a classic cover-up. When apologising to clients, the default position must be to acknowledge fully the clients' complaints, and the reasons that these arose. Half-truths or omissions will just make the situation worse, as concealment of the chatbot's existence just adds another potential layer of complaint. I would advise the Board to issue an apology 'over the head' of Alfie to all clients whether or not they have reported interactions with the chatbot, making it clear that Alfie's apology did not fully cover the circumstances. Only by doing this can the Board save face, and have any hope to preserve client loyalty longer-term." Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Most likely to ... StandFirst: This Grey Matter, concerning inappropriate workplace 'banter' over social media, is one of the scenarios discussed at the CISI's 2020 Annual Integrity Debate, held at Plaisterers' Hall on Wednesday 12 February, and broadcast via live webcast PublicBody: Bookings for the Annual Integrity Debate will be open from Monday 6 January 2020 Freddie has recently joined an investment firm. It's his first job, and he is eager to integrate himself within the team. Everyone he works with is really friendly and regularly socialise and build friendships which extend beyond the workplace. One Friday evening, after work, Freddie and a number of his colleagues head to the local pub for a drink. They occupy their 'usual' table, and strike up conversation. Freddie's line manager, Samantha, offers to buy a round for the group – saying she's impressed at the hard work they've all put in during the week, and the drink is a 'thank you' for their efforts. Samantha has been at the firm for 12 years, and is regularly praised as a manager for the way she thanks and values her team, so this is not an unusual gesture. She leaves her mobile phone on the table while she heads to the bar. The pub is busy, and Samantha has a large order to place, so she is away from the table for some time. Her phone is constantly lighting up with incoming messages, and Freddie is sitting right next to it. He tries not to look, as he doesn't want to pry, but the bright light from the phone is very distracting, and he can't help but glance at it from time to time. Most of the messages seem to be coming from a WhatsApp group called 'MOST LIKELY TO …'. Messages come in suggesting staff members who are 'most likely to' in a number of categoriesAt one point, Freddie notices his own name flash up on the screen. The message says, "Most likely to quit when the pressure gets too much … FREDDIE (I give him three months)", and has been sent from one of his teammates who is not at the pub. Immediately after, another colleague responds "No way! Freddie is tougher than you think … JANINE is waaaaay more fragile". Freddie glances over at Janine, another young team member who has recently taken some leave to attend her grandfather's funeral, and is completely oblivious to what's going on. Over the course of a few minutes, messages come in suggesting staff members who are 'most likely to' in a number of categories, including: get drunk at the Christmas party, get pregnant, get fired, not make bonus, get the biggest bonus, get caught with cocaine, pull a sickie, hit on the 18 year-old intern, have a nervous breakdown, and be late for the next team meeting. The people sending the messages are a mixture of staff members from different teams, and include young and old staff members, men and women, people of different ethnicities and different levels of seniority. Freddie notices, with disappointment, that one of the people in the group is Dan – a particular friend of his who started at the firm around the same time. At one point, Freddie takes out his own phone and surreptitiously takes a photo of Samantha's phone with all the notifications from this group clearly visible. At that point, Samantha comes back from the bar and starts handing out drinks. Freddie, gathering his courage, asks her what the 'MOST LIKELY TO …' group is. She doesn't seem at all worried, and replies, "It's just a bit of a joke, don't take it too seriously." Freddie, however, insists that it's not OK, and Samantha responds reassuringly, saying "Alright, if it means that much to you – and I can see you're upset – I'll tell everyone to stop. I was never that involved anyway, and I have the group muted most of the time." At that point, another colleague changes the subject and makes a joke, and Freddie laughs along, not wanting to ruin the positive atmosphere. Next day, though, Freddie regrets 'laughing along' and thinks he could have done more. But what? On reflection, it's a bit of a laugh and saying something more will only make it worse. Also, Freddie is keen not to ruin his relationship with his line manager. Freddie resolves to encourage Samantha to tell HR about the group, as it's clearly unacceptable. Freddie should report the group to HR, using the photo he took on his own phone as evidence. Freddie could encourage Dan to report the group to HR (either with Freddie, or on his own) – using the argument that it would be better to be the person that confesses rather than the person who gets caught. This dilemma appears in the January 2020 print edition of The Review. The CISI's opinion and voting results will be published in the May 2020 print edition of The Review. PrivateBody: === Title: Grey matters ethical dilemma: Fighting for the right? StandFirst: An Extinction Rebellion protest took place outside your work. Your line report, Lorena, a senior investment manager, was featured in the news and interviewed with other protestors outside the building. What would you do? PublicBody: The global environmental movement, Extinction Rebellion, has been staging mass global peaceful protests to raise awareness and understanding of the climate crisis. The protests have included public marches, demonstrations, school walkouts, and, since March 2020 – when the movement went indoors because of the Covid-19 pandemic – online rallies over videoconferencing platforms. On your morning commute in February, while scrolling through the news on your phone, you were stunned to notice that one of your senior investment directors, Lorena, a direct report, was pictured in the thumbnail of an article about the protest. After clicking on the article, you saw the image, taken over the weekend, of Lorena outside the company building. The article features an interview with her. PrivateBody: This dilemma is one of the scenarios discussed at the CISI's 2020 Annual Integrity Debate. View it on CISI TV The global environmental movement, Extinction Rebellion, has been staging mass global peaceful protests to raise awareness and understanding of the climate crisis. The protests have included public marches, demonstrations, school walkouts, and, since March 2020 – when the movement went indoors because of the Covid-19 pandemic – online rallies over videoconferencing platforms. On your morning commute in February, while scrolling through the news on your phone, you were stunned to notice that one of your senior investment directors, Lorena, a direct report, was pictured in the thumbnail of an article about the protest. After clicking on the article, you saw the image, taken over the weekend, of Lorena outside the company building. The article features an interview with her. You skimmed the article and clicked on the three-minute-long video interview. The journalist starts the interview, recorded by the main entrance with the company logo in full view, by asking Lorena to identify herself and why she decided to protest. She replies: "Hello all and welcome to the Extinction Rebellion protest today in our city. I'm a senior investment director and this is a cause that is extremely close to my heart …" As the interview continues, Lorena is joined by other protestors who together explain the impact individual actions have on the climate crisis and encourage more people to join and exercise their right to protest. Lorena is interviewed by the main entrance with the company logo in full viewAfter watching the video a few times and reading the article in full, you realised that it was number one on the news website and had been shared and retweeted on its Twitter page, and even included as a pinned tweet. You arrived at work early and continued to search where else the article had been featured. You saw that Extinction Rebellion had used all its social platforms to share the video, and it was quickly gaining viral traction, with over 100,000 views of the interview on its YouTube channel. It was also being shared by other news outlets. Colleagues began arriving at the office, and you could overhear them talking about what they had seen on the news. They all gathered around a desk to watch the video interview and began questioning Lorena's actions. You could see that it had already caused a distraction in the office. As Lorena was your direct report and very well known within the sector, regularly speaking and participating at external events, representing the company on topics such as impact investing and environmental, social and governance, you began to consider the reputational impact, if any, her choice of action would have on the company. Lorena was due to be in the office soon. As her line manager, you had to decide on the best course of action. You identified four options.What would you do? No formal action is required but you decide to speak with Lorena privately to remind her of what is expected of a senior member of staff. As the company has been indirectly associated with the Extinction Rebellion protests, and Lorena's involvement has the potential to bring the company into disrepute, a formal investigation will be opened which would most likely result in disciplinary action. You give Lorena a verbal disciplinary warning as the company social media policy states "be careful discussing things where emotions run high (eg, politics and religion)". Lorena's actions brought the company into disrepute and interfered with her ability to do her job. The Board should be informed, and in order to mitigate any further potential risks, speak with HR advising them that Lorena should be suspended on full pay pending the outcome of further investigation. This dilemma appears in the May 2020 edition of The Review magazine. The CISI's opinion and voting results will be published in the August 2020 edition. === Title: Verdict on Grey Matters ethical dilemma – Most likely to ... StandFirst: Read the CISI's verdict and readers' comments on the ethical dilemma that appears in the February 2020 print edition of The Review PublicBody: Read the February 2020 dilemma This Grey Matter, published in the February 2020 print edition of The Review, presents a dilemma that arises when inappropriate workplace banter over social media is inadvertently uncovered by a team member who is the target of some of the comments. In this situation, the appropriate action of the individual and the manager involved is of the utmost importance. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org. Suggested solutions and results On reflection, it's a bit of a laugh and saying something more will only make it worse. Also, Freddie is keen not to ruin his relationship with his line manager. (16%) Freddie resolves to encourage Samantha to tell HR about the group as it's clearly unacceptable. (47%) Freddie should report the group to HR, using the photo he took on his own phone as evidence. (35%) Freddie could encourage Dan to report the group to HR (either with Freddie, or on his own) – using the argument that it would be better to be the person that confesses rather than the person who gets caught. (2%) Responses received: 377 The CISI verdict This dilemma highlights some of the potential issues with the increasing use of social media in the workplace. A key principle to remember is that office gossip and banter about other colleagues in any form is unprofessional and can cause significant damage in the workplace. In this case, Freddie has been unfairly targeted and put in a difficult situation by his manager and others' poor behaviour. He does not want to potentially damage his relationship with his new manager, but he does want to stand up for what he thinks is the right thing to do. This Grey Matter is also one of the scenarios discussed at the CISI's 2020 Annual Integrity Event on 12 February (view it on CISI TV). The audience voting at the event considered option 3 to be the favourite, with 42% of the vote versus 35% for option 3 in the Review online poll. The chart below shows the audience votes before discussing the dilemma (vote 1) and after (vote 2). Our recommended solution is option 2, as this would enable Sam, the manager, to do the right thing to rebuild Freddie's trust and to appreciate the importance of not allowing office banter and gossip to exist in the workplace by having an appropriate discussion with HR. What is seen as office banter by some may seem very different to others and everyone has a responsibility to behave in a professional manner and to respect all their colleagues. This verdict is published in the May 2020 edition of The Review. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please contact us at ethics@cisi.org PrivateBody: === Title: Grey matters ethical dilemma: Who owns our clients? StandFirst: After co-founding a firm, Sumeet is offered a job at a competitor and must address the long-standing issue of advisers taking clients with them when moving to new firms PublicBody: Sumeet and Willow met while completing their graduate scheme at a top international investment bank. A few years later, they built up the courage and founded their own venture, OneInvest. They have grown OneInvest considerably in the past few years and focused on making it the one-stop shop for investors. Together they have built a small but strong team of ten and, over the course of the pandemic, were able to gain new clients from more experienced competitor firms that didn’t have the technology in place to assist their clients efficiently. Sumeet and Willow use next-generation technology that helps the firm reach more mid-level clients in a shorter time frame and still deliver great customer service. They pride themselves on providing easily digestible investment advice but also being accessible to clients who are not ‘traditional investors’. PrivateBody: Sumeet and Willow met while completing their graduate scheme at a top international investment bank. A few years later, they built up the courage and founded their own venture, OneInvest. They have grown OneInvest considerably in the past few years and focused on making it the one-stop shop for investors. Together they have built a small but strong team of ten and, over the course of the pandemic, were able to gain new clients from more experienced competitor firms that didn’t have the technology in place to assist their clients efficiently. Sumeet and Willow use next-generation technology that helps the firm reach more mid-level clients in a shorter time frame and still deliver great customer service. They pride themselves on providing easily digestible investment advice but also being accessible to clients who are not ‘traditional investors’. He knows that if he were to leave, most of his portfolio would come with himThey have a good working relationship – Sumeet enjoys building and developing the clients’ digital investment experience and Willow deals with the day-to-day business management. Some months pass and a firm, ABC Banking, contacts Sumeet asking if he would be interested in joining them. While he would usually ignore this type of call, ABC Banking is a leading FTSE 100 company and the opportunity couldn’t have come at a better time. Sumeet is immensely proud of what he and Willow have created, but running a business comes with immense pressures and this job offer could mean doing more of what he really enjoys. ABC Banking offers Sumeet a great onboarding package but also asks what proportion of his portfolio he could move across with him, highlighting how his clients at OneInvest could continue to benefit from his expertise at their leading firm. Sumeet is considering the offer but he knows that if he were to leave, most of his portfolio would come with him, which would leave OneInvest struggling to make ends meet. With no shareholders’ agreement in place and pressure for an answer from ABC Banking, what should Sumeet do next? With no shareholders’ agreement in place and pressure for an answer from ABC Banking, what should Sumeet do next? (Voting is now closed.) He should dismiss the offer like he has with other competitors as Sumeet has a fiduciary duty to do the right thing. Sumeet is passionate about digital investing so he should move across. He can highlight the new venture on his LinkedIn, so, should his clients wish to join him, they can make the move themselves. Sumeet wants to work with ABC Banking, so he should agree with Willow how many clients he can take with him. The needs of the clients come first. Sumeet should work with Willow and find someone who can join OneInvest and bring their expertise to help continue to develop the firm. === Title: Grey matters ethical dilemma: Social network StandFirst: Your assistant has used her personal social media account to complain about a client without mentioning their name. The client’s identity could be easily guessed. What should you do? PublicBody: Everyone at the medium-sized firm you work for, Strategic Finance, is excited to meet a new celebrity client, Nik Yan, a social media influencer. Nik has a growing online following and has recently become ‘verified’, reinforcing his social media presence. Nik will be working closely with your organisation, promoting the firm on social media through various posts on Instagram and X (formerly Twitter). The company’s CEO is particularly excited about the new venture, which will hopefully lead to greater reach and public engagement. Nik frequently appears in the media, speaking about how he overcame financial difficulties. He shares tips for getting the best bargains and is known for his ‘fake it ‘til you make it’ mantra. He has received a lot of support and sympathy from the public, especially cash-strapped fans who can relate to his frugal lifestyle. He has become a well-liked figure in the media and has even been approached by money-saving apps for sponsorship deals. Your assistant, Charlotte, can’t be present at the meeting with Nik (much to her disappointment, as she’s a huge fan), so you ask Nik for his permission to record the meeting for notes to be typed up later, as is standard practice. Nik agrees. In the meeting, you are surprised to learn that Nik is not struggling financially. He has well-organised financial affairs, with approximately £3.5m net assets. Nevertheless, you provide Nik with the advice requested on investments. Nik has received a lot of support and sympathy from cash-strapped fans but is not struggling financially After the meeting, you give Charlotte the recording so she can make notes for Nik’s file. The next evening, you are on X when you notice that Charlotte has made the following post: “Bad day at work today. Celeb client. I always thought they were for real but just another faker. Just goes to show some people will lie their heads off to get what they want. #unfollow” Her friends have responded with sympathetic comments and have tried to guess the celebrity in question. None have guessed right, and Charlotte has not responded to any of their guesses. The last time anyone responded to the post was 12 hours ago. The next day at work, you speak with the HR lead to discuss the situation. They tell you there is no formal social media policy and they are looking to develop it. The decision has been made to discipline Charlotte, but what should be the sanction? (Voting is now closed.) Charlotte should be dismissed. The client comes first, and as Nik is closely linked with the firm, people would be able to work out who the comments were about. This could jeopardise further business. As there is no firm social media policy, Charlotte should be asked to delete the post and be given a first written warning. As there is limited guidance, the firm should create a disciplinary panel and open a formal investigation on Charlotte. This will lead to a disciplinary hearing, where Charlotte can represent herself. It’s a matter of personal ethics. Charlotte’s X account is personal, and her views are her own. PrivateBody: === Title: Transfer authorised: the verdict StandFirst: The CISI verdict on a dilemma about accepting money from a manager PublicBody: Read the dilemma at 'Grey matters ethical dilemma: Transfer authorised'This Grey Matter, updated for publication in 2023, was published in the June 2012 edition of The Review as ‘Bonus points’.The scenario sees Ray, a junior member of a small bank, unexpectedly receiving a bonus from the branch assistant manager. Under company policy, he does not yet qualify for the bonus scheme, but Christine transferred the sum of £500 directly into his account. She had asked Ray not to mention it to anyone, but he told a trusted colleague and is unsure what to do next. We asked CISI members for their choice of the following responses, and the vote results are: Approach Christine directly to clarify the situation and return the bonus. (34%) Notwithstanding that he has been told not to discuss it with anyone, Ray should report it to whoever is responsible for HR matters in the branch. (34%) Call a staff helpline and raise the matter. (30%) Do nothing. He was very fortunate to have received a bonus in these difficult times. (2%) Responses received: 241 The CISI verdict The dilemma incorporates many themes from the CISI Code of Conduct, including conflicts of interest, respecting others, and speak up and listen up. Of the four options presented, there is a consensus from respondents that something needs to be done and the issue needs to be raised. However, understanding the next best course of action can be difficult. In this scenario, Ray is a junior member of the team, and while he acknowledges that Christine has singled him out for his hard work, he also feels embarrassed about being put in this situation. Firms have clear guidance on the steps to take if they have received inducements or incentives from anyone and regulators take a firm stance on bribery and corruption. The bonus from Christine ‘feels’ wrong and she should not have given him any amount, even £500. This transfer is out of company policy, out of formal practice, and may suggest a wider problem of managers not adhering to company policies. It is also worth noting that Dan now knows about the money transfer, and while the scenario does not focus on him, it does raise the question of what Dan’s responsibility is in this, now that Ray has confided in him. Our recommended solution is option 1 – directly approaching Christine to clarify the situation and return the bonus, followed by option two – report it. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please email ethics@cisi.org.Comments from CISI members If he has concerns about how the bonus was paid, he could speak with Christine directly in order to clarify the situation before taking the matter further, as long as he feels comfortable doing so. If not, he could ask HR or the staff helpline for assistance/advice.He was an idiot telling his friend. He should have kept his mouth shut. Never look a gift horse in the mouth. He's done nothing illegal.I would clarify the situation and then discuss it with a senior HR representative if he still has doubts.Bonuses would normally be administered by HR who will be able to confirm that an exception has been made. If they do not know about it, then there is something suspicious, and he will have been right to raise it. I don't think doing nothing is an option, and a staff helpline will not be aware of the local situation. Ask Christine to clarify and then take it further if it is a personal payment as this could leave him compromised in future.Christine appears to have acted naively with the bank's best interests at heart as she has not asked for any favours, or at least not yet. Option 1 allows Ray to protect his position and also potentially benefit if this does turn out to be a legitimate special arrangement. The problem can be resolved by simply discussing it with the manager, Christine. Depending upon the outcome of this conversation, he should be prepared to repay the bonus if he's still not satisfied.In addition to the actions in option 1, I would also let Christine know that I would be letting HR know that there'd been a misunderstanding in giving me the bonus, but allow Christine the opportunity to join you when you communicate this to HR. Ray has been placed in an unfortunate position and could go to HR to seek advice as well as seek help from the helpline service.Not necessarily return the bonus – but at least clarify the situation. Only Christine can clarify it, so even if he speaks to others they can only speculate as to the reasons for the payment. First, find out with more certainty whether it is from the bank or the manager personally. So, check the details of the bank transfer plus the payslip when it comes. Assuming it has to be directly from the manager, option 3 is a good first step, anonymously if possible. He could learn whether this practice might have been approved at some level (unlikely, but who knows). If it is not, then he would ask whether to report it to HR in the branch or a central function.What an interesting dilemma – option 1 would be best but is clouded by the fact he has told already his colleague Dan. Branch managers may have discretionary powers to make discrete awards for exceptional service outside of the normal bonus schemes as a way of attracting talent which staff are not aware of. Although Christine has described the award as her "personal recognition", that does not necessarily mean that she is funding the money from her own resources. Ray should clarify the position before taking further action. If Christine has funded the bonus herself, he should return it, preferably discretely, to avoid being compromised in future.Given he is unsure that it is appropriate that he received the bonus and he also wants to find out anonymously, Ray should call the staff helpline. Ray should speak to Christine and inform her that while he is thankful for the recognition, he is uncomfortable that the bonus is against company policy and would prefer clarity over the process by which he was awarded the bonus. After receiving this clarity he can then assess if he should return the bonus, and if he needs to raise anything with a neutral third party such as HR.Christine has written to Ray so there is a physical record of the payment and its purpose. It may be legitimate so before jumping to conclusions, it's sensible to speak to someone else.I am assuming the staff helpline is for confidential matters/whistleblowing. If not, there will be signposting for such so he should use that. PrivateBody: === Title: The verdict: Who owns our clients? StandFirst: The CISI verdict on a dilemma about advisers bringing clients with them when they change firms PublicBody: This Grey Matter is published in the July 2023 edition of The Review. PrivateBody: Read the dilemma at 'Who owns our clients?' This Grey Matter is published in the July 2023 edition of The Review. It highlights the longstanding issue of advisers taking clients with them when moving to new firms. In this case, Sumeet, co-founder of OneInvest, has been offered an opportunity with a competitor who wants Sumeet to bring clients with him. CISI members voted on the following options:He should dismiss the offer like he has with other competitors, as Sumeet has a fiduciary duty to do the right thing. (7%)Sumeet is passionate about digital investing, so he should move across. He can highlight the new venture on his LinkedIn, so, should his clients wish to join him, they can make the move themselves. (17%)Sumeet wants to work with ABC Banking, so he should agree with Willow on how many clients he can take with him. (25%)The needs of the clients come first. Sumeet should work with Willow and find someone who can join OneInvest and bring their expertise to help continue to develop the firm. (50%) Responses received: 224 The CISI verdict The dilemma incorporates many themes from the CISI Code of Conduct, including personal accountability, client focus, conflicts of interest and respect for market participants. No shareholder agreement is in place, making it more difficult for Sumeet to choose what to do next. He has received offers before, but this opportunity would allow him to do more of what he enjoys. There is viability in each option. Option 1 is aligned with Sumeet’s past actions but may not be fair to him. Option 2 highlights a degree of transparency but seems to divert his responsibility to his clients. Option 3 creates an agreement but assumes client ownership. Option 4 looks for a replacement but doesn’t address client ownership. As stated in option 4, the needs of the clients come first. It is also important to address the issue of client ownership. Our recommended solution is option 4 – find someone who can join OneInvest, followed by option 3, where Willow and Sumeet work out an agreement. Should you wish to suggest a dilemma or topic to feature in a future Grey Matter, please email ethics@cisi.org. Comments from CISI members Clients First! Option 1, if he can agree on a time scale with ABC and Willow to execute this. If he's in a hurry to move to ABC, then option 3, as he should speak to Willow either way and agree on a plan that is best for both of them and the clients at OneInvest. It is best to reach a consensus and ensure that one is acting in the client's interest at the same time. Why would ABC approach the individual when they could perhaps buy out the firm? This way, Sumeet could still benefit from joining ABC whilst all clients move. I think Sumeet has a duty of care to consider Willow and all the clients, not just a few. Transparency is arguably the most important issue. ABC should not really be attempting to poach clients, and frankly, the offer should be rejected. However, if Sumeet believes that ABC can provide better, more cost-effective services to an even greater number of people, I can see the temptation, though full disclosure to Willow and the clients is vital. They find someone who can join OneInvest to make sure the clients get the same level of service in the future. Draft a shareholders' agreement for this situation and for the future. After moving across, Sumeet could highlight the new venture, and then his previous clients could join him if they wish. Sumeet has the right to move to another firm. Setting up a business is not a lifelong commitment. However, he should have put a shareholder agreement in place (a surprising error given his profession), which sets out the non-compete terms that would apply should either of them leave. It is not clear that Sumeet's move to another firm would compromise the interests of the clients. Presumably, he would not be interested in the job if he thought the service would be worse, and clients should have the option to move if they wish. He should just not actively poach them until the non-compete period expires, during which time they should deal with someone else either at his old firm or his new firm. While this industry relies on relationships, it is not in the best interests of clients to become dependent on any individual. The clients’ needs come first, but they don't belong to anyone, according to current regulations. Intellectual ownership is a slightly different matter, and it is not beyond partners who have worked together successfully to resolve any issues amicably. The clients' needs should come first, so in an ideal world, this should be the option considered from the four suggested. However, my view would be that he should discuss this situation with Willow (as they could even be in a similar position) and assess whether the value of what they have built up could be crystallised by selling to a firm like the one he is speaking to. This could meet Sumeet's requirements, ensure the clients remain looked after and not leave Willow stranded (and provide a capital lump sum). The client must come first above personal ambition and career progression. This is always a difficult one. Sumeet could come to a financial arrangement with Willow to compensate for the loss of clients. ABC Bank could equally compensate Willow for the loss of clients, but at the end of the day, GDPR issues aside, it is the clients’ choice, not what Willow, Sumeet or ABC Bank think they have rights to. Sumeet has a duty to look after his own interests as well as the firm's clients, with an appropriate balance between the two. Working with Willow on how to extract himself from the business is being fair to all parties. === Title: Grey matters ethical dilemma: Friend or firm? StandFirst: Should Andreas tell his firm that his close friend and colleague is considering a job with a rival firm? PublicBody: Andreas is a senior director at a significant investment management firm – ABC Investment. Andreas’s colleague, Jim, has worked with him at the firm for ten years. They started at the same time and have collaborated successfully on several projects. They also socialise outside work and have become very good friends – a bond strengthened when Jim married Andreas’s sister a couple of years ago. Andreas and Jim are highly successful at ABC Investment, having built significant portfolios of lucrative client relationships. They both have been told that they are being considered as future partners by ABC Investment’s senior managers, provided their success and commitment to the firm continue. Their careers seem to be going well, and prospects for future progression appear good. One morning, in the senior managers’ meeting, it is announced that Jim will be leaving the firm. He has decided to take a career break, as he and his wife would like to enjoy some time away together before starting a family. He has agreed with management that he will not be leaving until after the end of the financial year, which would include the annual sales target assessment and employee bonus review. Jim will need his bonus, especially since he plans to start a family. PrivateBody: Andreas is a senior director at a significant investment management firm – ABC Investment. Andreas’s colleague, Jim, has worked with him at the firm for ten years. They started at the same time and have collaborated successfully on several projects. They also socialise outside work and have become very good friends – a bond strengthened when Jim married Andreas’s sister a couple of years ago. Andreas and Jim are highly successful at ABC Investment, having built significant portfolios of lucrative client relationships. They both have been told that they are being considered as future partners by ABC Investment’s senior managers, provided their success and commitment to the firm continue. Their careers seem to be going well, and prospects for future progression appear good. One morning, in the senior managers’ meeting, it is announced that Jim will be leaving the firm. He has decided to take a career break, as he and his wife would like to enjoy some time away together before starting a family. He has agreed with management that he will not be leaving until after the end of the financial year, which would include the annual sales target assessment and employee bonus review. Jim will need his bonus, especially since he plans to start a family. Since the management of ABC Investment believes that he will be leaving the industry, they have placed no post-leaving restrictions on him regarding gardening leave or client contact. Jim’s contractual terms are being set aside because of his service and good relationship with the organisation. Andreas is a little surprised by the news but is pleased to know that Jim will get some time away to focus on his married life and thinks it is as good a time as any to take a break, given their potential family plans. He is confident that Jim could get back into the industry if he wanted to since he is well-considered in the market. A month before Jim’s departure from ABC Investment, Jim and Andreas meet for a family lunch, and Jim tells Andreas that his plans have changed. He has been offered a more senior job at one of ABC Investment’s main rivals, Prime-Ace Investment, and is considering joining. Jim could start in a couple of months and jokes about how he could easily take several key clients with him. Andreas is surprised by the news. Jim and Andreas end up having a heated confrontation about Jim’s plans to leave ABC Investment. Andreas must now decide what to do, if anything, with this new information. What do you think Andreas should do? (survey now closed) Sometimes, things change, and Andreas does not want to be seen as overreacting. It would be inappropriate for him to get involved or say something on Jim’s behalf. It is Jim’s responsibility, not his, to tell ABC Investment.Tell his manager. This could result in the bonus Jim was likely to receive not being paid and restrictions being added to his leaving terms, impacting his future role at Prime-Ace Investment. Andreas is well aware of how much Jim needs his bonus.Wait a few more weeks until Jim has confirmed his plans and then inform the management. They may ask if Andreas was aware of anything beforehand as they are good friends, which could put Andreas in a difficult position. Raise the hypothetical issue in the next team meeting and see the team's reaction. This will hopefully get Jim to think about his company responsibilities. === Title: The verdict: Social network StandFirst: The CISI verdict on a dilemma about a client being called out on a personal social media account PublicBody: This Grey Matter was published in the November 2023 edition of The Review. PrivateBody: This Grey Matter was published in the November 2023 edition of The Review. Read the dilemma at 'Grey matters ethical dilemma: Social network' In this scenario, a member of your team has used her personal social media account to complain about the inauthenticity of an influencer – who is also an important client. It highlights the common misconception that views published on social media are completely private and will not be challenged. CISI members were asked for their responses, and the votes are as follows: Charlotte should be dismissed. The client comes first, and as Nik is closely linked with the firm, people would be able to work out who the comments were about. This could jeopardise further business. (3%)As there is no firm social media policy, Charlotte should be asked to delete the post and be given a first written warning. (62%)As there is limited guidance, the firm should create a disciplinary panel and open a formal investigation on Charlotte. This will lead to a disciplinary hearing, where Charlotte can represent herself. (31%)It’s a matter of personal ethics. Charlotte’s X account is personal, and her views are her own. (4%) Responses received: 326 The CISI verdict The dilemma incorporates many different themes from the CISI Code of Conduct, including personal accountability, client focus, conflicts of interest and respect for market participants. In this case, your assistant has been on social media complaining about a client. While there has been no mention of whether her account is private or public, or whether Charlotte has associated her social media account with the firms, there is still a duty towards the client. A few members voted for option one – that Charlotte should be dismissed as the client comes first. Some may argue what the difference would be between writing a complaint about a client on social media and speaking about a client over drinks after work. While everyone is allowed to have their own opinion, one should consider how this could be presented in the future. Similarly, what does this say about the culture of the firm? Is this an isolated incident, or is this a recurring theme with all employees? Is the firm aware of Nik Yan’s financial position, and how comfortable are they with Nik’s level of transparency and honesty? Nearly all companies now have social media policies specifically for this reason. There should be continuous guidance and understanding of the role that social media plays within the profession. Therefore, as there is no firm social media policy, we agree with the majority of respondents (62%) that the best practice would be to give Charlotte a first written warning (option two). This would allow you to follow up with Charlotte and explain why this course of action has been chosen and ensure she understands why. It would also give the firm an opportunity to complete a social media policy and communicate this. Should you wish to suggest a dilemma or topic to feature in a future Grey Matter, please email ethics@cisi.org. Comments from CISI members If the firm had a formal social media policy, Charlotte has clearly breached it, and this should lead to disciplinary action. Furthermore, the client's interests should always come first, but clearly, in this case, he has been less than honest in his representations. Charlotte should have had the correct training to know that she should not comment on a client, even more so as they may be identified. Still, the firm is clearly at fault for not having the correct social media policy in place and for not having provided the correct training. Deleting the comment should be a priority to mitigate the harm from a potential data breach. The firm should follow the steps required by the UK GDPR and the Data Protection Act. The lack of a written social media policy seems germane here. She wasn't breaking a rule because it hadn't been codified, but she was acting inappropriately, and that needs to be addressed and sanctioned. I think that a disciplinary hearing has the advantage of having everything out in the open and setting the guidelines for the policy that's about to be written. Charlotte should be told to delete the post immediately. While this may not stop it from spreading, particularly if it has been shared, it may limit the extent to which it is viewed further. This is a grey area indeed. This should encourage the HR department to accelerate the development of the social media policy. Charlotte's case should be handled with care, as there is no frame of reference for tackling this issue. What if she had made such comments to other people (clients) instead of using her social media handle? There are no mechanisms in place robust enough to capture such scenarios, and it becomes difficult to manage altogether. Cannot immediately discipline if the company has no policy or guidance. The company is responsible for providing correct training, including the use of social media. She hasn't named anyone but has identified them as a client. She has to take responsibility for mentioning work and client. There is a duty of confidentiality to the client. The client references the firm, and it is common for people to publish their employer, so it is very likely the client will be linked to the comment. The absence of a social media policy makes this complicated. Consideration of other policies and Charlotte's employment contract would form part of the investigation. Option 4 is the most appropriate. The best solution would be to ask Charlotte to delete it, explaining why but stopping short of a written warning. Whichever option is taken, the post should be deleted immediately. It's possible that this won't halt the spread of the post as it may have been shared already, but it should be done as a first action. I disagree that the client is easily identifiable. Just because this celebrity client is publicly associated with the firm does not mean anyone would assume the post was about him. Unless the firm is known to have only one celebrity client. She should be asked to delete the post, and a social media policy should be created. In the absence of a formal policy, any disciplinary action could be easily challenged by Charlotte. Although her conduct was inappropriate, I don't think it would warrant ending her role with the firm. Option 3 would give Charlotte an opportunity to discuss and understand the issues with what she has done. However, it is formal and potentially slow. Better that the post is deleted immediately. She understands her behaviour is not acceptable, and Strategic Finance recognises its shortcomings in not having a social media policy. Is it not the question that the firm should reconsider whether it is appropriate to actually continue its relationship with the influencer? === Title: Grey matters ethical dilemma: Artificial interruption StandFirst: A financial planning firm’s AI software to automate personalised recommendations has resulted in bias and risky investment advice. What should the firm do? PublicBody: Letters Financial is a distinguished medium-sized financial planning firm that has been taking steps to increase its commitment to innovation in an attempt to attract and retain more clients. It operates through two branches: Branch A, situated in a bustling metropolis, caters to a diverse clientele hailing from various backgrounds and ethnicities, while Branch B, nestled in a smaller town, primarily serves a homogenous community. The firm has completely overhauled its software to make processes more efficient for both staff and clients and has heavily invested in third-party AI software to automate and personalise financial recommendations. The software's ability to analyse vast amounts of historical data and provide real-time insights allows advisers to create diversified portfolios suited to clients' aspirations. This technological advance promises efficiency and tailored recommendations and has been praised for its ease of use. All client data must be input before the software can begin generating reports, trends and advice. This data includes postcodes, social media handles where available, and healthcare records. The initial results from the AI software were shown to the management team, and a range of recommendations were provided to the client managers. These included adjusting the amounts in certain investment portfolios and reallocating pension funds. Several of the management team raised concerns as they felt that the software was not yet ready to be launched, as not all client data input had been completed. They were assured by the AI firm that the correct measures had been put in place to mitigate any risks. The senior management team was eager to get started and see what assistance the AI software could provide. The full rollout was launched, and clients were notified of the changes introduced by the AI software. It was able to automate the production of client letters outlining the advice and recommending changes and deadlines. The AI-generated contradictory, sometimes risky, advice The management team was soon notified of a coding error in the software, which meant that many clients were recommended to invest their pensions into specific high-risk industries that were experiencing momentary growth. The coding error meant that the metrics-led advice started steering clients towards portfolios that disregarded the fundamentals of diversified investment. The AI software, fuelled by historical data and market trends, seemingly failed to account for the volatile nature of the financial markets and the inherent risks of overconcentration. The coding error resulted in clients of the two different branches of Letters Financial receiving contradictory advice. Certain data points were assumed based on other information. For example, the clients in Branch A were advised to make more risky investments than the clients in Branch B. Based on the diversity of clients in Branch A, a few high-level assumptions of lifestyle choices and risk appetites were also made. Despite the coding error, which has since been fixed, management has observed a significant reduction in client complaints compared to the previous software. The technology overall seems to be generating helpful advice, and it’s been heavily invested in. Management is, therefore, reluctant to make any immediate changes. (Survey closed) What should the senior management team do next? Introduced new technology will always have hiccups. Letters Financial understands this risk and should continue working through any other issues. They should stop using the AI software and review the process. The senior management team does not understand the overall implications of implementing the third-party AI software. The team should implement a secondary process to manually check the AI software is working correctly. The error is detrimental, and the use of the AI software needs to be stopped immediately. Being biased towards customers is unacceptable, even if this is a result of a programming error. PrivateBody: === Title: Friend or firm? The verdict StandFirst: This Grey Matter, published in the March 2024 edition of The Review, sees two colleagues who are also close friends find themselves in a difficult position when one decides to leave the firm PublicBody: Read the dilemma 'Friend or firm?'In this scenario, Andreas must decide whether to tell his firm that his friend and colleague, Jim, has changed his mind after announcing his departure from the firm. When Jim announced his departure, he told the firm he intended to focus on his family. He was not placed on gardening leave. However, he has now revealed his intention to work at a rival firm. CISI members were asked for their responses, and the votes are as follows:Sometimes things change, and Andreas does not want to be seen as overreacting. It would be inappropriate for him to get involved or say something on Jim’s behalf. It is Jim’s responsibility, not his, to tell ABC Investment. (32%)Tell his manager. This could result in the bonus Jim was likely to receive not being paid and restrictions being added to his leaving terms, impacting his future role at Prime-Ace Investment. Andreas is well aware of how much Jim needs his bonus. (29%) Wait a few more weeks until Jim has confirmed his plans and then inform the management. They may ask if Andreas was aware of anything beforehand as they are good friends, which could put Andreas in a difficult position. (27%) Raise the hypothetical issue in the next team meeting and see the team's reaction. This will hopefully get Jim to think about his company responsibilities. (12%) Responses received: 154 The CISI verdict The dilemma incorporates various themes from the CISI Code of Conduct, including the principles of personal accountability, client focus and conflict of interest. Andreas's relationship with Jim complicates the issue. This is reflected in how the membership responded, with three of the four options receiving a similar number of votes. The first option allows Andreas to avoid the situation and lets the onus sit with Jim. This option provides Jim with the opportunity to be transparent with his employer. However, it is not particularly fair to Andreas and the team. The second option is more transparent and fairer, but it could be more difficult in practice and fracture their relationship. The third option is not the most transparent, but it allows Jim to finalise his plans and be responsible for the next action. The fourth option is open but not completely transparent and still may require some action from Andreas or Jim. The dilemma also opens wider questions. How would the situation have been different if this had happened to someone else in the team? What does it say about the culture of the firm and what risks could be associated with actions that are taken? While each of the options has its merits, the best course of action in this instance would be to be as transparent and fair as possible and proceed with option two – for Andreas to tell his manager. This may be the more difficult course of action, but sometimes the right thing to do is not always the easiest. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please email ethics@cisi.org. Comments from CISI members Jim is being disingenuous with his leaving plans; this needs to be addressed by senior management in my view.As nothing is certain at this stage, Andreas should wait until Jim's plans are certain.How long was Jim's career break going to be? Presumably ABC Investments were happy with the risk he could come back to the industry with a rival firm in a few months anyway? Even so, Jim has a duty to behave ethically and tell ABC of his change of plans, and Andreas should make Jim aware that he'll tell ABC if Jim doesn't.Option 3 seems to be too thinly veiled to be anything other than publicly exposing Jim's plans. Jim appears to be acting without integrity and it is important that the firm be aware of this. However, waiting until the situation has been finalised seems the most proportionate and well-founded option.Andreas is in a very difficult position because of Jim's disclosure to him, which was obviously made in the course of a family discussion rather than at work, but it is Jim's responsibility to do the right thing, and it would be unfair for the expectation to fall on Andreas. Andreas should tell his brother in law to do the right thing by the firm.The firm clearly does not have a suitable contract of employment if there is no allowance for an individual's change of circumstances. It is not Jim's problem if her receives an employment offer after intending to take a year out. His contract should have covered this eventuality.If Jim's current contract includes references to moving to a competitor and what that might entail (non competes etc) then Jim ought to tell the management of his change of plans. If Jim refuses to do so, then Andreas needs to address it.Plans do change, often without warning and unexpectedly. Jim should not have told Andreas and involved him. Andreas needs to consider his own ethical position. He is not a secret policeman. I think option 3 is best since Jim is yet to make a firm decision. If his bosses complain about not being told sooner, Andreas can say that as far as he knew, Jim had not decided about the role and it was Jim's place and not his to tell the firm about it, something Andreas had encouraged him to do. Jim is being deceitful it seems. Andreas needs to act decisively to protect ABC Investment's future interests.Option 5 – Provide Jim with the opportunity to tell the firm himself before invoking 3, if that's the plan he sticks to. Also, the problem stems from the decision to not place restrictions in the first place, which should not have happened irrespective of mooted plans. ABC Investment should change their stance on garden leave and client contact if the reasons for leaving are changed from what they have been told. However, they may not find out until it is too late and Jim is only "considering" the move at this stage. Andreas is not only a colleague and friend but also a relation by marriage now. Andreas should continue to pressure Jim to make his real intentions clear to the firm as soon as Jim decides definitively on his future plans. With a heavy heart, Andreas should inform his firm – it's a clear breach of Jim's contract. I do question how many people would actually do this though. Jim has been quite selfish in telling Andreas. PrivateBody: === Title: Artificial interruption: The verdict StandFirst: The CISI verdict on a Grey Matters dilemma about biased AI software making risky recommendations for clients PublicBody: Read the dilemma 'Artificial interruption'In this scenario, financial planning firm Letters Financial used third-party AI software with real-time insight to allow advisers to create portfolios tailored to clients. Although several members of the management team raised concerns about issues with the software, it was launched and soon after, the firm uncovered a coding error. The error meant that the advice provided was steering clients towards portfolios that disregarded the fundamentals of diversified investment. The coding error was fixed, but what should the management team do next?CISI members were asked for their responses, and the votes are as follows:Introduced new technology will always have hiccups. Letters Financial understands this risk and should continue working through any other issues. (3%)They should stop using the AI software and review the process. (34%)The senior management team does not understand the overall implications of implementing the third-party AI software. The team should implement a secondary process to manually check the AI software is working correctly. (29%)The error is detrimental, and the use of the AI software needs to be stopped immediately. Being biased towards customers is unacceptable, even if this is a result of a programming error. (34%)Responses received: 181 The CISI verdict Read the CISI's guidance on the ethical principles to consider within digital technologies. The guidance is a supplementary reference alongside the CISI Code of Conduct. The dilemma incorporates various themes from the CISI Code of Conduct, including the principles of personal accountability, client focus and conflict of interest, respect for market participants, and speak up and listen up. There were various opportunities where risks could have been mitigated earlier. First, the team working with the AI firm should have taken time to understand which client data points, if any, were necessary to be collected. The coding error could have led to further failures with personal sensitive data at risk of being distributed. Second, many members of the management team raised concerns about the software. Why were the issues not taken seriously? Why did the senior managers not listen up? This would have been an ideal opportunity to revise the deadline and test the robustness of the system they had so heavily invested in.Finally, after the coding error was uncovered, the management team had yet another opportunity to launch the software responsibly. They could have taken the time to check processes and mitigate issues, but they didn't.This dilemma highlights how easy it is to implement technology irresponsibly. The firm proceeded hastily to cut costs and reduce client complaints, and by doing so, had the opposite effect – damaging its reputation and increasing costs. Over 60% of respondents felt the software should be stopped, and nearly 30% decided that the automated process needed a secondary manual check. The best course of action in this instance would be Option 4, as it’s a detrimental error and the software needs to be stopped. Should you wish to suggest a dilemma or topic to be featured in a future Grey Matter, please email ethics@cisi.org. Comments from CISI members No complaints doesn’t mean that everything is running as it should. It could just mean that errors haven’t been picked up yet. The software should be checked, and once management is confident it is working correctly, then it should be restarted. The fourth option may be the correct choice, but for my liking is too specific about what’s actually gone wrong, long before any review process has been carried out. For example, we are told, “Despite the coding error, which has since been fixed, management has observed a significant reduction in client complaints compared to the previous software.” That needs to be thoroughly reviewed. It’s not that clear whether the ‘coding error’ is a genuine error, or an attempt to fix bias in the original software which is being interpreted as a ‘coding error’ because of bias in the company. Management is aware of a significant error and, irrespective of complaints, has a duty under TCF rules to correct the software and make good any resulting client losses. The company may have a case to recover costs from the AI software supplier. The firm also needs to review its processes for testing and going live with new software They should stop the AI until they find out the problem and fix the coding error to minimise the liability risk. After the pause, the reintroduction should include transitionary tools or checks to verify the AI is working correctly. After management has gained confidence in the system, these tools can be used intermittently to continually review outcomes. What does the investment committee in the firm think about having its responsibility given to an algorithmic output that is personal to every client and overseen by individual advisers (who evidently don't question the output)? It's almost impossible to list all the business risks this type of AI deployment introduces. Absolutely no chance it would pass through a Consumer Duty filter. Clearly a manual audit is needed before advice is implemented until such time as there are no further errors. Close choice between 3 & 4. Bias is unacceptable so parallel running of the AI system with manual checks is a must until there is certainty that programming glitches have been ironed out. It is important to move with the times and AI can be useful to avoid human bias too. Any new system should be regularly reviewed and manual comparisons done to ensure the advice given is suitable. I do not believe that the system is detrimental as clients have not suffered losses, but better oversight should have been undertaken. The testing should not be rushed and should include variables such as volatility and risk appetite. Samples should be drawn from the widest possible pool and results (letters produced) should have human supervision/oversight in the loop before dispatch. I selected option 4 but it was a choice between this and option 2) I felt that the error had serious implications for clients. Management's reluctance to make changes seems to be driven by commercials and not by the outcomes for their clients. The coding errors will likely have far-reaching consequences for clients who accepted the advice to invest in the recommended investments. These are likely to have been out with their risk profile and tolerances. If there wasn't a checking and oversight process in place at the launch of the AI software, this is a fundamental governance failure, as the advice should have been checked before disseminating to the client (even after it has been fixed) Additionally, a review of all advice given should be started immediately and proactive remediation undertaken. Unethical and not fully thought through, or tested. They got lucky with the outcome in the scenario provided. The software may make suggestions based on the data available, but recommendations should be made by the client managers. There is data missing and assumptions have been made, and this should be addressed as it would be while using any other tool (risk profiling, cashflow modelling etc.) PrivateBody: