It's an effort towards making financial terms easy for non finance background people , the ppt explains about the ehtical issues in finance and also about various scams . please share your thoughts with me on the same .
2. Ethics are standards of right and wrong, good
and bad. Ethics are concerned with what one
ought to do to fulfill one’s moral duty. There
are two aspects to ethics:
•Being able to determine what is right or
wrong, good or bad
•Committing to doing what is right and good
11. Fraud in Financial Statements
Fictitious Revenues
Concealed Liabilities and Expenses
Fraudulent Asset Valuations
Improper or Fraudulent Disclosures or
Omissions
Creative accounting – form of fraudulent
financial reporting so as to provide
misleading information.
12. Duties of an Auditor
To give an accurate statement to the
members about the state of affairs of a
company
To meet the objectives of the Companies
Act 1985 and also the Articles of
Association
To be reasonably skillful and careful in
13. Ethical Audit
An audit that assess a business’s
structures, procedures, systems and
policies.
It measures the extent to which the
activities of a business comply with the
standards it has publicly declared to its
external customers
It measures business conduct against
varied moral standards of the
community.
14. Objectives of Ethical Audit
To provide a critical assessment of functioning of
business
To investigate into acquisition or restructuring
operations
To determine the type of training necessary for
employees
To establish ethical conduct of business
To enhance, measure and promote the quality that
increases business performance by assessing them
against the ethical business objective
To improve the quality of governance by evaluating
the performance and ensuring that financial
information is both available and reliable
15. Ethical Issues in Financial
Markets
Deception: act of misrepresenting
relevant information
Churning: Excessive or inappropriate
trading for clients account by a broker
who has control over the account with
intent to generate commissions rather
than to benefit client
Unsuitability
Unfairness in Markets
16. Introduction Insider trading
Insider trading essentially denotes
dealing in a company ‘s securities on the
basis of confidential information relating
to the company which is not published
or not known to the public used to make
profit or loss. It is fairly a breach of
fiduciary duties of officers of a company
or “ connected” persons as defined
under the SEBI regulations,1992,
towards the shareholders.
17. Cont’d
Insider terms actually includes both legal and
illegal conduct.
The legal version is when corporate insider
officer, directors , and employees buy and sell
stock in their own companies. when corporate
insiders trade in their own securities , they
must report their trades to SEBI.
Illegal insider trading refers generally to
buying or selling a security , in breach of
fiduciary duty or other relationship of trust and
confidence, while in possession of material ,
non public information about the security.
18. Who are insider traders ?????
Remember this ‘STONE COLD’ guy????????
19. Who are insider traders?
Corporate officers, directors , and
employees who traded the corporations
securities after learning of significant ,
confidential corporate developments.
Friends , business associates, family
members , and other types of such
officers , directors , and employees, who
traded the securities after receiving such
information.
20. Cont’d
Employees of law, banking , brokerage
and printing firms who were given such
information to provide services to the
corporation whose securities they
traded.
Govt employees who learned of such
information because of their
employment by the Govt .
Other persons who misappropriated
,and took advantage of, confidential
21. In India…….
Only 14 cases taken up by SEBI for
insider trading in 2003-04 , which went
down to only 7 in 2004-05.
In terms of cases completed, the no
was only 9 and 5 respectively.
So does India has fewer incidence of
insider trading or our systems/laws not
geared enough to detect such cases?
22. Insider Trading
Refers to trading on price sensitive
information by company employees or
individuals closely connected with the
firm
This information has not been disclosed
to other market participants
23. Ethics & Insider Trading
It violates equality of opportunity
Does not give a level playing field between
insiders and outsiders
Might harm exchange as a whole because
investors might not be willing to trade on
exchange that does not give shareholders
their rights.
26. Hostile Takeovers
Are those that elicit opposition from the
boards or employees of Target company
Reasons for opposition are as follows:
Disagreements over price
Protecting their own interests
28. Poison Pills
An anti-takeover device used by
company’s management to make takeover
prohibitively expensive for the bidders
Company under target changes AOA so
that group of Shareholders have special
rights to buy and sell preferred stock at
highly favorable prices (At times below
market price)
29. Greenmail
It occurs where a potential takeover agent
purchases stock in a company
After the purchases have totaled five percent the
agent must announce his intention to takeover
the company, if that is the intent
Stock prices go up in anticipation of takeover
battle
Management of target company sends
greenmails to prevent a shareholder from taking
over the company
Takeover agent ends up selling the shares back
to company at an increased or higher negotiated
30. Buy Back
Purchase of its own shares by the Company
Bring down public holding and increases
promoter holding
A listed Company may buy back its own
shares by any of the following methods:
Through tender offer;
From open market though:
o Book building process
o Stock exchange
31. People Pill
Management threatens that in event
of a takeover the entire management
team will resign
If managers act in their own interest
rather than company’s long term value
then they are acting unethically