Derek and Erica have somewhat different ideas about the best way to manage their money going forward. Erica is
happy to keep their present and future savings in their bank earning a moderate rate of interest. However, Derek has started to take a more active interest in finance and investment and has come to the conclusion that if they are to have any chance of achieving their goal of saving for the house deposit, they must take a much more aggressive approach. He has been doing some intensive research on the internet and find that FRXME, a foreign exchange trading firm, claimed to make an average return on investment of 60% per annum over the last two years. Derek hopes he will be able to persuade Erica to invest their $90,000 savings in FRXME for a period of three years, while investing any additional future monthly savings in the bank. Erica laughs at his idea and insists that their money should stay in the fixed deposit.
After a lot of heated discussion, Derek and Erica decide to get investment advice from their friend, Spencer, who commenced work as a financial adviser two months ago. They ask Spencer to provide them with more information on investing, and what he thinks about the merits of their respective approaches. During the course of a one-hour meeting, Spencer agrees that a more aggressive investment approach is required to help them achieve their goal. He also states that sources of information on the investment process are somewhat limited and that Derek and Erica have made the right decision in approaching him for advice. Spencer recommends that they invest in a recently listed technology-based firm established by a friend of his, called DUITWISE. DUITWISE shares cost $4.50 each and the prospectus promises a dividend of 15 cents per quarter. Being a start-up, DUITWISE has never made a profit in its 3 years of existence. Its share price has fluctuated by 18%, -12%, and 30% over the last three years respectively.
What are ethical issues arising from Spencer's advice?
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