Ethics In Finance: Vikrant Sanjiv Neeraj Singha Shiv Runa

TUMBA

Ethics in Finance Vikrant Sanjiv Neeraj Singha Shiv Runa

Overview ♦ Introduction ♦ Ethics in Financial Services ♦ Ethics in Financial Markets ♦ Insider Trading ♦ Hostile Takeovers ♦ Accounting Ethics ♦ Conclusion

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Ethics? ♦ “Ethics represents the attempt to resolve the conflict

between selfishness and selflessness; between our material needs and our conscience.” -Demsey ♦ “A business that makes nothing but money is a poor

kind of business.” -Henry Ford

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Introduction ♦ Principal-agent model of relationship in

financial transactions. ♦ Modern capitalist system based on rational-

maximizer paradigm# Individuals are self seeking. # Seek to maximize own interest.

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Introduction ♦ Behavioral assumption for modern

financial- economic theory runs counter to ideas ofTrustworthiness Loyalty Fidelity Stewardship Concern for others

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Ethics in Financial Services ♦ Deception – Withholding of relevant information or

giving false or misleading information

• What is deceptive? • Choices of what and how much to disclose?

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Ethics in Financial Services ♦ Churning ♦ Breach of fiduciary duty ♦ How much trading is excessive? ♦ Solutions??

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Ethics in Financial Markets – Fairness is important – Fraud and Manipulation • Investors depend upon issuer of information • Transparency requirements

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Ethics in Financial Markets ♦ Fairness in markets ♦ Equal Information – Encourage acquiring all information possible – `Legitimacy – play by the rules – Equal Access ♦ Equal Bargaining Power ♦ Efficient Pricing

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Insider Trading ♦ Trading of stock or securities by individual

with potential access to non-public information about the company ♦ Insiders when buys or sells based upon company owned information, violates the contract with shareholders ♦ There are legal insider trading and illegal insider trading

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Hostile Takeovers ♦ Corporate takeover which is carried out against the

wishes of the board of the target company. ♦ Original company may be entirely swallowed up or

may operate semi-independently.

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Accounting Ethics ♦ Nature of work of accountants require high

level of ethics. ♦ Accounting concepts and conventions-

GAAP

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Accounting Ethics ♦ Preparation of financial statements. ♦ Keeping management aware of present

conditions and future estimations. ♦ Confidentiality of organizations’ financial

position

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Conclusion ♦ Financial ethics depends on a complex interlay of

FM ,industry leadership and individuals personal integrity. ♦ It makes the company’s activities more legal and

policies more social. ♦ As consumers we must be aware and cautious about

the individuals and corporations who manage our money. 12/10/09

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Inputs

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Thank You

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