ETHICS IN EMERGING FINANCIAL MARKETS AND INSTITUTIONS

Systematizing

Defending

Recommending concepts of right and

wrong behavior.

Protecting the financial interests of clients Conducting business with high transparency Conducting needs analysis before any product or service

recommendations Respecting and maintaining confidentiality of any information

entrusted to you Use of only sales illustrations that are completely accurate and

compliant with state and federal regulations. Knowing when to refer clients to another professional when a

planning situation is outside your area of practice or skill sets.

Reputation! Reputation ! Reputation

Why bussines ethics ? Why should one be ethical? Duty to make money Rules of the game

MARKET CONFIDENCE

CONSUMER PROTECTION

FINANCIAL CRIME

PUBLIC AWARENESS AND CONFIDENCE

Self-interest sometimes morphs into greed and selfishness.

Some people suffer from stunted moral development.

Some people equate moral behavior with legal behavior.

Contd… Individual responsibility can wither

under the demands of the client. Professional duty can conflict with

company demands

In the financial markets In financial services industry(including banking and insurance)

By finanacial people in organizations.

Financial services sector, i.e., credit card fraud, cheque fraud and other types of identify-related fraud.

Insurance fraud Telecommunication-related fraud Securities-related fraud Computer-related fraud

Unauthorized extension of credit facilities

Pledging of spurious goods Hypothecating goods to more than one

bank; Inflating the value of goods Removing goods with the involvement or negligence of bank employees etc..

insider trading. stakeholder interest vs.

stockholder interest. investment management. campaign financing.

WHAT SERVICES IT RENDERS

TO WHOM

IN RETURN FOR WHAT

AND FOR WHAT PURPOSE

Unrecognized responsibility

to express their responsibilities in ethical terms, as the impact of their decisions continues to grow.

“It’s not me, it’s the market!”

The need for truthfulness To eliminate all ambiguity, financial

operators have a duty to present themselves in their true colors.

Transparency and asymmetrical information

Respect for the rules of the market

Indian Companies Act 1956To regulate functioning of the companies Aims at giving more protection to Investor Capital issue control Act 1947 Securities contract(Regulations )Act 195 To prevent undesirable transactions in securities To regulate the business of Trading in stock exchange.

SEBI , established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992 To protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental RBI Guidelines for commercial Banks

Code of Conduct for Accountants and

Auditor. Code of Conduct for Merchant Bankers. Code of Conduct for Insurance Agent. Code of Conduct for Bankers. Code of Conduct for Brokers and

Members.

Contd… Most large companies have a code of

ethics—a set of general guidelines to encourage employees to behave ethically and responsibly.

ethical behavior is governed more by the individual rather than the environment.

Morgan Johnson is in a tough situation. The president of her company wants her to date all the sales invoices in the first half of May as if they occurred in the month of April. It’s a hard thing to say refuse since the request is coming from such a high figure of authority as the president of the company. What she should do depends on the person she is; if she is one of strong moral character she should refuse at the expense of the possibility losing her job

Contd… On the other hand, if she wanted the

inflated bonus she could manipulate the financial statements for the benefit of the company. The problem with this is she will be breaking some of the guidelines issued by the Financial Accounting Standards Board (FASB) and may face prosecution or maybe even jail time.