1. Ethics in finance

2. Why is it important to worry about ethics in finance?When you think about it, you realize that you put yourhard-earned savings in the care of financial firms assetmanagers, banks, insurance, and all kinds of funds andyou trust them to look after the money.You want the best return, but there is a balance betweenrisk and reward.You need to feel confident that you can trust the financeprofessionals to act with integrity, in your interests. 3. Financial sector in INDIAREGULATORSRBI, SEBI, FMC, IRDA, PFRDA, MoF, HLCCMARKETSCommodities, equities, debt , foreign exchangePLAYERSBrokers, firms, banks, financial institutions, FII ,mutual fundmanagers, investors, exchanges, depositories, custodians,registrars 4. ETHICAL VIOLATIONS (finance related)1. Insider trading Insider trading is the trading of a corporations stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company Such a trade is motivated by the possibility of generating extraordinary gain with the help of nonpublic information (information not yet made public). It gives the trader an unfair advantage over other traders in the same security. 5. 2-Stakeholder interest V/s stockholder interestShareholders hold shares in the company that is they own part of it.Stakeholders have an interest in the company but do not ownit (unless they are shareholders).Often the aims and objectives of the stakeholders are not the same asshareholders and they come into conflict.The conflict often arises because while shareholders want short-termprofits, the other stakeholders desires tend to cost money and reduceprofits. The owners often have to balance their own wishes againstthose of the other stakeholders or risk losing their ability to generatefuture profits (e.g. the workers may go on strike or the customersrefuse to buy the companys products). 6. 3. Campaign financing 7. Examples of unethical temptations Make exaggerated claims to counter exaggeratedclaims of a competitor Offer a customer an unauthorized gift in return fortheir business Conceal information from a customer in order to gettheir business and to meet your sales goals Put non business-related expenses on your expenseaccount Divulging confidential information about one customerto another in order to facilitate a sale 8. Common Reasons (Excuses) forUnethical Behavior1. Everybody else is doing it.2. Its not that big of a deal.3. Its necessary (the ends justify the means).4. Its not going to hurt anyone.5. Its for the benefit of the company or somebody else.6. I deserve it.7. Its legal.8. Nobody will know. 9. Common Product Categories.Planning productsThey are designed to preserve wealth or income and include life, disabilityand long-term-care insurance and annuities. Recommended productscomplement core offerings such as estate, business or financial planning.Service productsThese products are designed to protect clients against unanticipated losses. They include health, auto and homeowners insurance, forexample. Such product recommendations do not result from a firms coreoffering. Investment productsThese are designed to accumulate wealth. This category is transactional--based on market trades--and as such the most removed from a firms coreservices. 10. How to curb unethics?1. Improving standards2. Comprehensive laws3. Pledging of shares4. Weak links5. Auditors role6. Institutional investors 11. Ethics In Financial Service Financial Services Professionals job and missionis to enable clients to grow and protect theirwealth. This means trillions of dollars of assets areinvolved. The Financial Services industry is also highlyregulated. Regulation minimizes fraud, theft andmisuse. Ethics purifies the industry. Ethics set thestandards of excellence for professionals infinancial services. Ethics in the financial services industry affecteveryoneeven consumers. If you are not aFinancial Services Professional, youre aconsumer of Financial Services. 12. Code Of EthicsProtecting the financial interests of clientsConducting business with high transparencyConducting needs analysis before any product orservice recommendationsRespecting and maintaining confidentiality of anyinformation entrusted to youUse of only sales illustrations that are completelyaccurate and compliant with state and CentralGovt regulationsKnowing when to refer clients to anotherprofessional when a planning situation is outsideyour area of practice or skill sets. 13. THANK YOU