Final answer:
The violation of independence and objectivity on the part of an investment professional can be caused by threats to withhold information and services, an investment professional's compensation arrangement, and gifts from a client.
Step-by-step explanation:
The correct answer is option d. All of these answers are correct.
Threats to withhold information and services, an investment professional's compensation arrangement, and gifts from a client can all cause the violation of independence and objectivity on the part of an investment professional. Let's look at each option:
- Threats to withhold information and services: If an investment professional is threatened with the withholding of important information or services, they may feel pressured to act in a way that compromises their objectivity and independence.
- An investment professional's compensation arrangement: If an investment professional's compensation is tied to certain outcomes or incentives, it may create a conflict of interest and compromise their ability to make unbiased recommendations.
- Gifts from a client: Accepting gifts from a client can create a sense of indebtedness and bias in an investment professional's decision-making.
Therefore, all of these options can lead to a violation of independence and objectivity for an investment professional.
The correct answer is option d. All of the provided answers can cause a violation of independence and objectivity on the part of an investment professional.
This ethical conundrum is faced when an investment professional must navigate conflicts of interest in a way that may benefit them personally or their causes but potentially harm or reduce benefits to others, or violate a rule or standard.
For example, threats to withhold information and services can pressure an investment professional to act contrary to their unbiased judgment. An investment professional’s compensation arrangement, such as bonuses based on certain outcomes, may incentivize them to make decisions that are not in the best interest of their clients.
Gifts from a client can create a sense of obligation, or the appearance of bias, both of which can undermine the professional’s independence and objectivity. In practical scenarios, this is closely related to the situation where a bank supervisor may face political pressure when making decisions that impact a banking institution.