Financial Misconduct, Ethical Theory, and Regulatory Ethics—Promoting Accountability

<div> Reports about misconduct in the financial sector are seemingly endless. Misconduct is wide-ranging and varied—from abusive practices in mortgage securities and commodities markets to manipulation of foreign exchange and interest rates.2 Truly, the reports suggest an ethical crisis in finance. A major complaint is about the lack of serious efforts to hold to account executives that engaged in misconduct or were in leadership positions at the banks. The events call into question the adequacy of the current arrangements for ensuring integrity in the financial sector, at the institutional and individual levels. </div> <div> <br> </div>This paper examines developments in the financial sector and identifies a role for regulatory ethics in promoting integrity and accountability. In this effort, the paper also explores theoretical perspectives in ethics and how they can shape business behavior. Specifically, the article proposes corporate codes of ethics, a mandatory requirement under the New York Stock Exchange Listing Rules, as instruments to promote morality in corporate conduct. Ethics codes, which are internally generated, must be tailored to reflect the experience and made more effective. They can be amplified to specify standards to govern the fiduciary duty of care applicable to executives, personal integrity and accountability. This method can be effective in shaping the moral climate in corporations and in checking misconduct.c