Investment Banks: Client Confidentiality and Business Ethics

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Given this situation, the focus of the current work is to examine the development of new business routes and practices that can support confidentiality and management of ethics and new ways to meet the increased regulation and customer concerns in the investment banking sector.

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In this respect the key aim of the work is to examine ethical practices, particularly in the areas of disclosure and confidentiality and identify if there are investment banks which are using new and improved practices to meet customer demands in these areas and thus raise confidence. To achieve this aim, the following objectives have been set for the work.

The primary aim of the study is to identify how investment banks are applying new technologies in fostering client confidentiality and business ethics. To enable achievement of this aim, the following core objectives were defined for the work.Identify the specific approaches that are being generated and developed by selected investment companies which clearly demonstrate a focus on improved ethical business practices.

Identify and evaluate the ways in which recent issues related to fraudulent trading and unethical behaviours in the investment sector have impacted on the banks focus on customer issues

If appropriate, make recommendations to the investment banks on the need for adopting progressive practices in the industry.

The intent with these objectives is that if achieved, they would lead to an answer to the primary research question that was defined as how can investment banks develop new practices that comply with regulations, ensure that customers are able to see clearly the ethical guidelines under which the organisation operates, whilst maintaining client confidentiality and delivering competitive advantage.

1.3 Research QuestionsTo be able to answer this primary research question, several more specific research questions were developed, as set out below:

What are the new approaches that are being adopted by investment banks in relation to personal and business ethics in the investment sector?

What indications are there that show banks recognition of ethics and confidentiality as important factors in customer service evaluations in the investment sector and what has led to this increased focus and recognition?What specific practices have been introduced by investment banks in the sector to address client concerns about ethics and confidentiality?What recommendations, if any, can be made to investment firms regarding future business practices to support ethics maintenance and customer confidentiality?1.4 Problem IdentificationThe objectives and research questions emerged from the definition of the primary problem under investigation, which is, how can investment banks develop innovative practices that comply with regulations, ensure that customers are able to see clearly the ethical guidelines under which the organisation operates, whilst maintaining client confidentiality and delivering competitive advantage. This problem emerged as a result of the recession and growing public awareness of the potentially inappropriate business models and practices used in the industry which led to the financial crashes of 2008. The resulting lack of confidence experienced by customers in investment banking means that organisations in the sector need to develop new and creative ways of encouraging customers to do business with them as Busquets, (2012) and Johnson and Peterson (2014) note. Specifically,this relatesto personal and business ethics and the effects of confidentiality and nondisclosure on business confidence. In this regard, and in the context of the investment banking sector, non-disclosure refers to a legal contract between two or more parties which indicates that there is a confidential relationship between them(Hinkelman, 2005).In particular this confidential relationship refers to information that may be shared between those in the agreement, but will not be made available to the general public (Castillo and McAniff, 2006). The agreement may be between an organisation and its customers, or between two organisations. With this in mind, examination of innovations that have already been adopted, and how they address the issues of confidentiality and personal and business ethics on business confidence and non-disclosure agreements were felt to be an effective way to resolve this research problem.

1.5 Rationale and Contribution of the Study

In all business sectors, innovation and creativity are seen as an important element for growth and development of customer relationships (Black and Lynch, 2004; Christenson et al, 2014). In banking, and especially investment banking, there is a clear need to review business models and develop new ways of interacting with customers. Of particular importance is the area of ethics and confidentiality, which is a major concern for customers, and can be a factor in levels of confidence. As such,there appears to be a need for examination of existing business models of ethics, delivery of client confidentiality and building relationships with customers, and examination of the effect of confidentiality perceptions on business success.

The difficulty is that in the highly regulated investment banking sector, adopting new strategies for nondisclosure and ethical behaviour management may be more complex than in other industriesdue to constraints on certain practices as a result of regulation or legal impacts on the sector.

As such, as an area of investigation it is both pertinent in relation to innovation management and timely given theinvestment bankingsector needs to recover from the recent financial crisis and manage customer expectations about confidentiality and personal and business ethics within the sector.

As the focus of investment banks on innovative practices is a new development in the sector, particularly in regards to ethics and confidentiality, the study makes an initial contribution to the investigation of the value of adopting the innovative customer focused approaches and their role in the future strategy of a bank.

1.6 Scope of the Study

To examine the innovative practices in relation to ethics and confidentiality this study investigates two banks: Fidor Bank and Charles Schwab. These two banks were chosen for their indications as being innovative in the sector, which is explained more fully in the methodology chapter.Both of these institutions have both a retail sector and an investme...

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