Ethics in finance

Submitted to: Prof. Shilpa shinde

Group Members
Name Roll No

Alok Ankad
Pratima Patil Heena Sonavya Madhurani Vartak

61
98 113 117

Meaning of Ethics
Dictionary Meaning- System of moral principles,

rules and conduct. The origin of this word is from Greek word ETHOS which means character. Ethics is defined as the ability to distinguish between right and wrong and to act accordingly.

What is Ethics in Finance

Ethics in finance is one of the main things which

everyone has to follow from the small, medium and big level company because almost all the country depend up on the financial background of the country because without financial component no business can run for a long time.

Code of Ethics in Finance

1. Act with honesty and integrity, avoiding real or clear conflicts of interest in personal and professional relationships. 2. To provide information which is full, fair, accurate, complete, objective, relevant, timely and understandable, including in and for reports and documents that the Company files with, or submits to, the other public communications made by the Company. 3. Act in accordance with all applicable laws, rules and regulations of governments, and other appropriate private and public regulatory agencies. 4. Act in good faith, responsibly, with due care, competence and carefulness, without misrepresenting material facts or allowing my independent judgment to be subordinated. 5. Respect the confidentiality of information acquired in the course of business except when authorized or otherwise legally obligated to disclose the information. It should not be used for personal advantage. 6. To promote ethical behavior among our associates. 7. Adhere to and promote this Code of Ethics.

Ethical issues in Finance

Financial statements
Financial Markets Insider Trading

Hostile Takeovers

Fraud in Financial Statements

Fictitious Revenues Concealed Liabilities and Expenses

Fraudulent Asset Valuations

Improper or Fraudulent Disclosures or Omissions.

Example:

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.

Example: Harshad Mehta Scam

Insider trading
Insider trading essentially denotes dealing in a companys 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.

Example: RAJAT GUPTA SCAM

Hostile Takeovers
A hostile takeover is an acquisition in which the company being

purchased doesnt want to be purchased, or doesnt want to be purchased by the particular buyer that is making a bid. Hostile takeovers only work with publicly traded companies. That is, they have issued stock that can be bought and sold on public stock markets. Example:

Anti-takeover Defense Measures

Poison Pills Green mail Buy back People Pill Pac-Man Defence

Poison Pills
A strategy used by corporations to discourage hostile

takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills: 1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount. 2. A "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger. Example:

Greenmail
Like blackmail, greenmail is money that is paid to an

entity to make it stop an aggressive behavior. In mergers and acquisitions, it is an antitakeover measure where the target company pays a premium, known as greenmail, to purchase its own stock shares back (at inflated prices) from a corporate raider. Example:

Buy Back
A buyback allows companies to invest in themselves. By

reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns. Buybacks can be carried out in two ways: 1. Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them. 2. Companies buy back shares on the open market over an extended period of time.

People Pill
A defensive strategy to ward off a hostile takeover. The

target company's management team threatens that, in the event of a takeover, the entire team will resign. The purpose of a people pill is to discourage the acquiring company from completing the takeover, by introducing the possibility of having to put together an entirely new management team. This strategy is only effective if the acquiring company wants to keep the existing management. Example:

Pac-Man Defense
In Pac-Man defense , the target firm turns around and

tries to acquire the other company that has made the hostile takeover attempt. Example: Attempted acquisition of Martin Marietta by Bendix Corporation in 1982

Golden Parachutes
Lucrative benefits given to top executive in the event

that a company is taken over by another firm resulting in the loss of their job. Benefits include item such as stock option, bonuses severance pay etc.

Conclusion
No business and company can run without finance. It

is lifeblood for all the organization. So if almost all the field in finance follows ethics in their duty almost all other process will function very well without any discrepancies.

Thank You!!!