Ethics in FinanceEthics in Finance

Presented by- Nikhil Jamnare Roll No.19 Pranav Soman Roll No.53 Vijaykumar Pammi Roll No. 35 Hardik Sampat Roll No.45 Ashesh Joshi Roll No.21

Group Group No.04No.04

Characteristics of Characteristics of Management Prone to FraudManagement Prone to Fraud

Unduly aggressive financial TargetsDomination by person or group

without controlsAggressive accounting practice to

keep stock prices highPressure to reduce tax liabilitiesMajor performance related

compensationNon-Financial personnel involved in

accounting matters

Ethical issues in FinanceEthical issues in Finance

Financial statements

Financial Markets◦Insider Trading

Hostile Takeovers

Fraud in Financial Fraud in Financial StatementsStatementsFictitious RevenuesConcealed Liabilities and ExpensesFraudulent Asset ValuationsImproper or Fraudulent Disclosures or OmissionsCreative accounting – form of fraudulent financial reporting so as to provide misleading information.

Duties of an AuditorDuties 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 identifying the true nature of the accounts

Ethical AuditEthical 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.

Objectives of Ethical AuditObjectives of Ethical AuditTo 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

Ethical Issues in Financial Ethical Issues in Financial MarketsMarkets

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

Insider TradingInsider TradingRefers 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

Ethics & Insider TradingEthics & Insider Trading

It violates equality of opportunityDoes 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.

Hostile TakeoversHostile TakeoversAre 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

NSEL CRISISNSEL CRISIS

Joint Venture between FTIL & NAFEDCommencement – 15th OCT’2008H.O.:MUMBAI5600 crore rupees scam!!!An outreach in 16 states trading in 52 commoditiesWhat triggered the scam?Permission to retread without taking delivery of goods

WHAT WENT WRONG?WHAT WENT WRONG?

31st July 2013 NSEL was stopped from carrying out new contractsInvestors protested on 28th august 2013Filing of FIR by PANKAJ RAMNARESH SARAF Against NSELAction by economic offence wing

Police arrest of MD ANJANI SINHA ,ASSISSTANT VICE PRESIDENT AMIT MUKHERJEE & other borrowersAttachment of property of defaultersFudging of documents by NSEL officials

FURTHER STEPSFURTHER STEPS

EFFECTS OF THE SCAMEFFECTS OF THE SCAMDerailing of the commodity marketErosion of investor confidenceLiquidation by Retail & Institutional players

ScandalYear

Reported

INR value

Location People involved Summary

Saradha Group financial scandal

2013 30,000 West BengalMamata Banerjee, Mukul Roy,Madan

Mitra, Kunal Ghosh, Srinjoy Bose, Sudipto Sen and many more

Ponzi Scheme(Fraudulent Investment) – 200 private companies

Indian Coal allocation scam

2012 185591 National

Comptroller and Auditor General of India, the coal ministry, many electricity boards and private

companies

coal blocks allotted, not auctioned

Uttar Pradesh NRHM scam

2012 10000 Uttar Pradesh Mayawati, Babu Singh Kushwahasiphoned off a massive sum estimated

at 100 billion (US$1.6 billion)

2G scam 2008 176,000 NationalNira Radia, A. Raja, M. K. Kanimozhi,

many telecommunications companiescommunication bandwidth auctioned

for lower than market value.

Uttar Pradesh food grain scam

2003 35000 Uttar Pradesh Mulayam Singh Yadav, MayawatiFood which the government purchased to give to the poor was instead sold on

the open market

List of Big scams in IndiaList of Big scams in India

Speak AsiaSpeak Asia

Promoter : Sumiran Pal & two other masterminds

Affects – 2.4 million Indians

Scam amount – 2200 crore

Scam – Getting investment by conducting marketing research in the name of big companies

Thank you