Unethical Practices in Finance
UNETHICAL
Describing unsuitable behavior, even if the behavior is legal. Unethical behavior may violate a code of conduct for a particular industry or sector. Professional organizations may censure or revoke the licenses of those professionals who are found to have committed unethical acts.
SOME EXAMPLES OF UNETHICAL PRACTICES
1. Holding up bills of vendors on silly reasons and ultimately buying from others to avoid payments to earlier vendors.
2. Delay in paying wages, interest to financiers, incentives, bonus to employees.
3. Cheating employees of their dues towards medical expenses, leave travel assistance, children education fees, etc.
UNETHICAL THINGS IN FINANCE
FRAUD
A fraud is a dishonest act by an employee that result in personal benefit to the employee at a cost to the employer. Example- a bookkeeper in small company diverted Rs. 75000 of bill payment to a personal bank account over a three year period.
MISLEADING FINANCIAL STATEMENT
Before investing money investor want to know the company's financial position and performance. They want to see the balance sheet and income statement. So, financial companies sometimes intentionally prepare false financial statement to improve their chances of getting invested.
INSIDER TRADING
A trading of corporation's stock or other guarantees by individual with access to non-public information about the company, it is unfair would destroy the security markets by destroying investor trust.
THE KETAN PAREKH SCAM
The Ketan Parekh scam was the second biggest scam the move backward the Bombay Stock Exchange after the Harshad Mehta scam. Ketan Parekh was also known as the Pied Piper of the Dalal street. When Harshad Mehta(biggest scammer of the Bombay stock market) believed to be single handedly driving the stock market, Ketan Parekh had created a 200% annual return on some stocks. Then, the low profile Indian stock market was instantly once again making caption all over the world. Later, it turned out that it was broker turned operator Ketan Parekh that was operate the market and not changes in the fundamentals.
THE ILLEGALITIES
The complication with Ketan Parekh's dealing was two-fold:
1. Firstly, he had been receiving money from the supporters of many companies to take their share prices up. This can be seen as insider dealing and by itself was enough to get Ketan Parekh into severe difficulties.
2. However, to top it up, Ketan Parekh had also rob large amounts of cash from the Madhavapura Mercantile Commercial Bank. He was trust to have suborn the officials of the said bank to move them to lend against shares to a greater extent than was permitted by law. At first, the bank crossed its prescribed limits to lend against market securities as it extended credit to Ketan Parekh. Then the bank basically started making unsecured loans to him. The loans would be permitted first and the security would be collected a few days later making the loans unsecured for the interim duration
Describing unsuitable behavior, even if the behavior is legal. Unethical behavior may violate a code of conduct for a particular industry or sector. Professional organizations may censure or revoke the licenses of those professionals who are found to have committed unethical acts.
SOME EXAMPLES OF UNETHICAL PRACTICES
1. Holding up bills of vendors on silly reasons and ultimately buying from others to avoid payments to earlier vendors.
2. Delay in paying wages, interest to financiers, incentives, bonus to employees.
3. Cheating employees of their dues towards medical expenses, leave travel assistance, children education fees, etc.
UNETHICAL THINGS IN FINANCE
FRAUD
A fraud is a dishonest act by an employee that result in personal benefit to the employee at a cost to the employer. Example- a bookkeeper in small company diverted Rs. 75000 of bill payment to a personal bank account over a three year period.
MISLEADING FINANCIAL STATEMENT
Before investing money investor want to know the company's financial position and performance. They want to see the balance sheet and income statement. So, financial companies sometimes intentionally prepare false financial statement to improve their chances of getting invested.
INSIDER TRADING
A trading of corporation's stock or other guarantees by individual with access to non-public information about the company, it is unfair would destroy the security markets by destroying investor trust.
THE KETAN PAREKH SCAM
The Ketan Parekh scam was the second biggest scam the move backward the Bombay Stock Exchange after the Harshad Mehta scam. Ketan Parekh was also known as the Pied Piper of the Dalal street. When Harshad Mehta(biggest scammer of the Bombay stock market) believed to be single handedly driving the stock market, Ketan Parekh had created a 200% annual return on some stocks. Then, the low profile Indian stock market was instantly once again making caption all over the world. Later, it turned out that it was broker turned operator Ketan Parekh that was operate the market and not changes in the fundamentals.
THE ILLEGALITIES
The complication with Ketan Parekh's dealing was two-fold:
1. Firstly, he had been receiving money from the supporters of many companies to take their share prices up. This can be seen as insider dealing and by itself was enough to get Ketan Parekh into severe difficulties.
2. However, to top it up, Ketan Parekh had also rob large amounts of cash from the Madhavapura Mercantile Commercial Bank. He was trust to have suborn the officials of the said bank to move them to lend against shares to a greater extent than was permitted by law. At first, the bank crossed its prescribed limits to lend against market securities as it extended credit to Ketan Parekh. Then the bank basically started making unsecured loans to him. The loans would be permitted first and the security would be collected a few days later making the loans unsecured for the interim duration
THANK YOU
ANKIT KUMAR
According to you how you see fraud is unethical behaviour by any organization?
ReplyDeleteIn my opinion a fraud is a dishonest act by an organization that result in personal benefit to the employee at a cost to the employer and it is unethical behaviour by any organization
DeleteIs preparing false financial statement is good for any organization or not ?
ReplyDeleteI think it depends on situation in which ypur organization is right now because Before investing money investor want to know the company's financial position and performance. They want to see the balance sheet and income statement if you are laging with little bit Finance then you can show false statement and if you are not in verge to take investment with invester then you should not show false financial statement if you get caught then it will create lot of problems for your organization
DeleteCan you briefly explain insider trading
ReplyDeletetrading of corporation's stock or other guarantees by individual with access to non-public information about the company, it is unfair would destroy the security markets by destroying investor trust.
DeleteCan you explain Ketan Parekh scam?
ReplyDeleteThe Ketan Parekh scam was the second biggest scam the move backward the Bombay Stock Exchange after the Harshad Mehta scam. Ketan Parekh was also known as the Pied Piper of the Dalal street. When Harshad Mehta(biggest scammer of the Bombay stock market) believed to be single handedly driving the stock market, Ketan Parekh had created a 200% annual return on some stocks. Then, the low profile Indian stock
DeleteHow you see insider trading in Ketan Parekh case?
ReplyDeleteYes,Firstly, he had been receiving money from the supporters of many companies to take their share prices up. This can be seen as insider dealing
DeleteHow Ketan Parekh rob large amount from comercial bank?
ReplyDeleteKetan Parekh had also rob large amounts of cash from the Madhavapura Mercantile Commercial Bank. He was trust to have suborn the officials of the said bank to move them to lend against shares to a greater extent than was permitted by law. At first, the bank crossed its prescribed limits to lend against market securities as it extended credit to Ketan Parekh. Then the bank basically started making unsecured loans to him
DeleteWhat you have learnt from unethical practice in Finance
ReplyDeleteIn my opinion i think we should be transperent with our invester and we should have proper Finance management of our organization and we have to make a well maintained balance sheet of our organization
DeleteFor you how you see UNETHICAL behaviour of any organization
ReplyDeleteDescribing unsuitable behavior, even if the behavior is legal. Unethical behavior may violate a code of conduct for a particular industry or sector.
Delete