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 of-
Trustworthiness
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.

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 Inputs

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 Thank You

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