Question 1: Please identify or select the U.S. regulatory agency that we have discussed in class that you feel is the most powerful and important with respect to ethics and financial regulation? Why?

Question 2:  Please set out a qualitative cost and benefit analysis of the following scenarios (e.g., whether it was a good or bad decision, what are the potential economic issues that arise from the decision, how will the decision potentially affect the business, etc.?). What are the ethical questions involved? Do you support the decision and why? If you were going to make changes to the decision, what would they be?

a. A large financial institution with commercial and investment bank operations worldwide has decided to reduce the mandatory retirement age from 65 years old to 45 years old.

b. A local government decides that all firemen or firewomen must be able to carry 200 pounds for 100 feet, carry 70 pounds up four flights of stairs, and be able to chop a three foot diameter log within three minutes.

c. A publisher of sports magazines and owner of sports bars/restaurants decides that all employs must wear beach attire. Those who do not wear such attire will be fired.

Question 3: A 90 year old widow with 2 adult children has $30 million of cash to invest. She visits her broker. The broker receives 150 bps for every dollar she invests in funds managed by the broker and 50 bps if the broker refers her to another fund that is not managed by the broker. The 90 year old widow has a number of different expenses to cover: her increasing medical costs, living expenses including food, health aides that attend to her around the clock, and home improvement costs, her entertainment expenses as she hosts large parties every week, and the care of her three cats. Her adult children do not need her support or money but would be excited about a potential inheritance. The widow tells the broker that she wants to make sure that she receives current income from any investment in order to cover her expenses, she does not want to take risk, and she believes that the Emerging Markets will collapse within the next year.

The broker takes this into account and recommends the following investments as being suitable for the widow:

a. 30 year AAA rated Connecticut state bonds rated BBB - this is not managed by the broker

b. 10 year credit card-backed subordinated / mezzanine piece (this is the credit enhancement piece of an asset-backed offering) rated BB - this is managed by the broker

c. 30 day commercial paper rated A1+ - this is not managed by the broker

d. 90 day Beijing China municipal notes rated A - this is managed by the broker

e. 1 year U.S. Treasury bills rated AAA - this is not managed by the broker

Do you agree with the broker's recommendations? Please comment on each investment as far as suitability and whether there is an ethics issue?

Question 4: Over the course of history, the U.S. government will identify countries that are considered dangerous to American interests and will ban financial transactions by U.S. financial institutions with those countries.

Employees of U.S. financial institutions are supposed to act in the best interests of their employers and make money for those employers but not conduct business in violation of U.S. law.

Assume that there is a government that is not yet banned by the U.S. government but that government has been known to violate human rights or to support activities that are contrary to the U.S., should a U.S. financial institution enter into financial transactions with that government or in any other way help that government? Why?

Question 5: The City of Acme, Connecticut decides that it will limit the potential for riots, public destruction of property, and trouble from politically sensitive demonstrations and marches from right wing radical groups that show up in their group's "uniforms" so the City government enacts a law that no group can march or demonstrate if they are dressed in uniforms other than in uniforms of the U.S. military, local or state police, or local firemen. The local Girl Scouts want to march in Acme's Memorial Day parade but are forbidden by this law. Is this law ethical? What are the arguments supporting the City government's law? What are the arguments to support that the Girl Scouts should be able to march? What are the competing interests of individual rights and the need to protect the public welfare?

Textbooks -

1. Ethics and Finance An Introduction by John Hendry

2. Financial Regulation and Compliance - How to manage Competing and Overlapping Regulatory Oversight by H. David Kotz