The Difference between Ethical and Legal Standards

The Difference between Ethical and Legal Standards

Often people equate ethical behavior with legal choices. However, there are numerous choices that may be legal but have no moral standing. It is important to remember that all laws stem from a place in which moral covenant has broken down. The means by which control is maintained in these circumstances is to set laws and stipulate punishment. Therefore, the law is reactive. By contrast, ethical conduct is proactive and the means by which standards of practice maintain a high level of morality beyond legality.

One may adhere to the letter of the law but ignore the spirit of the law. For example, IRS regulations repeatedly single out actions with “no legitimate business purpose.” If an investment professional makes choices with no legitimate business purpose in order to avoid short-term loss (i.e. taxation, fees) then you may be staying within parameters of what is legal, but with no purpose other than to get around the law.

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