Can Ethics be Taught? Evidence from Securities Exams and Investment Adviser Misconduct
46 Pages Posted: 10 Oct 2019 Last revised: 26 Dec 2019
Date Written: September 27, 2019
We study the consequences of a 2010 change in the investment adviser qualification exam that reallocated coverage from the rules and ethics section to the technical material section. Comparing advisers with the same employer in the same location and year, we find those passing the exam with more rules and ethics coverage are one-fourth less likely to commit misconduct. The exam change appears to affect advisers’ perception of acceptable conduct, and not just their awareness of specific rules or selection into the qualification. Those passing the rules and ethics-focused exam are more likely to depart employers experiencing scandals. Such departures also predict future scandals. Our paper offers the first archival evidence on how rules and ethics training affects conduct and labor market activity in the financial sector.
Keywords: ethics; ethics training; compliance training; financial misconduct; financial regulation; fraud; investment advisers; labor economics
JEL Classification: D18, G20, G24, G28, G34, G38, J44, M41, M53
Suggested Citation: Suggested Citation