The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

Which Values Should Determine the Actions of Financial Intermediaries 37
there are also funds like the “Morgan Funshares” in the USA which assure their
investors that their money is invested mostly in alcohol, tobacco and casinos.
Legal duties also incorporate duties of diligence, however, which possibly presuppose
certain attitudes and values. Particularly in the ethical codes of professions
like doctors and lawyers, the degree of care that members of these professions are
expected to exercise presupposes certain attitudes and values. These heightened
legal duties of care and “due diligence”, as well as the duty to espouse the values
of the profession which are conducive to fulfilling those professional duties, only
apply to certain well-defined professional groups, not all citizens. Citizens living in
a democratic state have to espouse their legal duties, but not the entire “value system
of the constitution”. 8 To demand that every citizen should internalize an entire
state-defined value system is either totalitarian or romantic. 9
Which Values Should Determine the Actions of Financial
Intermediaries in the Capital Market?
Considerable ethical problems arise out of the position of trust of financial intermediaries
who operate as trustees and brokers for investors. To the extent that people’s
retirement provision will be transferred from state social insurance schemes into
fully-funded private insurance schemes, the role of financial intermediaries will
become increasingly important. Financial intermediaries must advise people seeking
retirement provision fairly and appropriately to the matter at issue. The financial
intermediary is in a fiduciary relationship with the client, which gives rise to heightened
duties: the service provider assumes the role of a guarantor and trustee who is
trusted by his or her client. The trustee initially has the negative duty to refrain from
gaining any personal or private advantage from the fiduciary relationship beyond the
fee agreed in the contract as payment for his or her services. The service provider
has the further duty to observe good faith and due diligence. The question that arises,
therefore, is whether it is necessary and useful to bind the financial services provider
in the capital market more specifically to certain values.
The necessity of heightening the professionalization of financial intermediaries
arises from the fact that they administer the wealth of others, and their decisions
are of the utmost importance for securing the future existence of their clients.
The role of the financial intermediary is comparable to that of the doctor, for
whom an elevated duty of diligence and a guarantor role is legally stipulated
because of the higher risk of his conduct to the life and the health of the patients.
Although the domain of financial services is not a matter of life and death, it
8 The state can demand this of its organization-members, the civil servants, but not from all citizens.
Nevertheless, it can encourage citizens to identify with the value system of their state.
9 The state has no organizational purpose in this sense and no organizational values, because it is not
a special-purpose organization. It provides the conditions for others, individuals and organizations,
to pursue their own purposes within it.