Ethical Issues Related to the Mass Marketing of Securities |
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Authors: | Michael P Coyne Janice M Traflet |
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Institution: | (1) Management Department, Bucknell University, 309 Taylor Hall, Moore Avenue, Lewisburg, PA 17837, USA |
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Abstract: | This paper examines ethical issues involved in the mass marketing of securities to individuals. The marketing of products
deemed “socially questionable” or “sinful” (like tobacco and alcohol) has long been recognized as posing special ethical challenges
(Kotler, P. and S. Levy: 1971, Harvard Business Review
49, 74–80; Davidson, D. K: 1996, Selling Sin: The Marketing of Socially Unacceptable Products (Quorum Press, Westport). We contend that marketers should consider securities (i.e. common stock, options) in a similar
vein, as a potentially dangerous product. Given the inherent volatility of equity prices, responsible marketers need to exercise
caution and restraint in promoting securities. We evaluate whether the NYSE’s current guidelines adequately encourage ethical
marketing practices and deter unethical ones. Using recent examples of controversial brokerage advertisements, we expose weaknesses
in the Exchange’s vague injunction that members not “mislead” reasonable people by making “exaggerated claims” in their communications.
From a moral perspective, we find it troublesome that intentionality need not be present for a promotion to be considered
misleading. Also problematic is the continued invocation of the reasonable person standard to judge the propriety of advertisements.
We close with some thoughts on improving the quality of securities marketing. We suggest that the NYSE, in the interests of
fostering higher ethical behavior among member marketers, may need to revive a marketing code of conduct prevalent on Wall
Street in an earlier era. |
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Keywords: | advertising business ethics codes of conduct contramarketing demarketing morality NYSE reasonable person standard self-regulation SEC |
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