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Financial Ethics and Compliance

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1-What are some of the ethical dilemmas faced by traders in their pursuit of profits for both their company and themselves?

2-Suggest solutions to these dilemmas which will allow the trader to continue to produce profits.

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The solution discuses the financial ethics and compliance faced by traders.

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What are some of the ethical dilemmas faced by traders in their pursuit of profits for both their company and themselves?

Insider trading is one of the major problems facing traders in financial services and securities. The main problem with it is that it is based on stolen information, or information that is not being used the way in which it was intended. It is also a problem for basic fairness, since the position the insider possesses is her only authority for having this head start on the market.

Insider trading suggests another problem, that of information asymmetry in general. An insider, regardless of his position, has more information on the product, the market and its players than the average investor or client (at least most of the time). To what extent is a trader, especially in an advisory capacity, supposed to level this asymmetry? Several things suggest themselves. First, one can rationalize and claim that since perfect competition does not exist, situations like information imbalances are quite normal. They cannot be removed. On the other hand, another rationalization might be self interest. Since all morals are relative, then there is no reason why one cannot pursue happiness however she can.

All of this suggests a third problem, one more fundamental ...

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