STOCK BROKERS SHENANIGANS

You work for a Stock Brokerage Company (S). As part of its sales incentive program, S awards points to its salespeople for sales they make. These points can then be cashed in for vacation trips. S owns 20% of a certain fund group (M), and S's ownership stake increases with increased sales. S is now rewarding sales of M by offering double credits and five-day trips to European and U.S. resort towns for brokers with more than $500,000 in production in M. Although the firm has a policy against sales contests on mutual funds, and while in the past, reps were unable to accept trips from other funds because of a strict interpretation of NASD rules, the firm says that these are not sales contests and the trips are informational and related to due diligence.

Apparently, reps are not being forced to sell the fund. No pressure to do more or less says one of the brokers. However, the firm says participants do need to qualify (for the trips) by doing business with a particular product and express an interest in doing more. The firm considers the trips advanced training. WHAT ARE THE ETHICAL ISSUES? Reminder: Ethical issues are not the same as legal or business issues. Let s assume that the firm s actions represent a good business decision and are consistent with the laws and regulations. Are they Ethical? WHO ARE THE STAKEHOLDERS?