Presentation

Ethical issues in Financial Management

BBA 6TH

Group Members
Farooq Ch
Anum Iqbal

15309
15331

Shan Fiaz
Zulqarnain Ali

15308

Hassan Qamar

15336

15305

Meaning of Ethics
Ethics is the study of human behavior which is right or wrong. In
general, ethics means doing right things to others, being honest to
others, being fair and justice to others.

WHAT IS FINANCE
Finance means fund or other financial resources; it deals with matter
related to money and the market. The field of finance refers to the
concept of time, money and risk and how they are interrelated.
Banks are the main facilitators of funding.
Finance is the set of activities that deals with the management of
funds.

Role of ethics
Ethics plays an important role in finance and sources of ethical
behavior in finance and accounting can be from the following :
Code of Conduct for Accountants and Auditors
Code of Conduct for Merchant Bankers
Code of Conduct for Insurance Agent
Code of Conduct for Bankers
Code of Conduct for Brokers and Members

Ethical issues in Finance

Ethics in Finance can be developed around three broad themes:
In Financial markets.
In Financial services industry (including banking and
insurance).
In Financial statement.

Shan

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

Fraud in Financial Statements

Fictitious Revenues
Concealed Liabilities and Expenses
Fraudulent Asset Valuations
Improper or Fraudulent Disclosures or Omissions.
Example : The Satyam Computer Services scandal was a corporate
scandal that occurred in India in 2009 where Chairman Ramalinga
Raju confessed that the company's accounts had been falsified. CID told
in court that the actual number of employees is only 40,000 and not
53,000 as reported earlier and that Mr. Raju had been
withdrawing 20 crore (US$4 million) every month for paying these
13,000 non-existent employees.

Frauds in the financial sector (service)

Legal authorities define fraud as a crime that involves the use of
dishonest conduct in order to obtain some unjust advantage over
someone else.
Frauds include:
Financial services sector, i.e., credit card fraud, cheque fraud
other types of identify-related fraud;
Insurance fraud
Telecommunication-related fraud
Securities-related fraud
Computer-related fraud

and

Zulqarnain

Types of bank fraud

Electronic fraud
Identity theft
Credit/Debit card fraud
Cheque fraud.

Credit/Debit card Fraud

Credit card and debit card fraud is a crime whereby your credit or debit
card can be reproduced in order to use the credit balance to obtain a
financial advantage. The creation and/or alteration of a credit/debit card
occurs when the information contained on the magnetic strip is reproduced.
This type of crime is known as skimming.
Credit or debit card fraud can also occur when your card is lost or stolen and
used by a third party to purchase goods with those cards or to remove cash
from the cards.
Credit or debit cards can also be intercepted in transit while being sent to
you. Your cards can also be compromised by a dishonest merchant who
undertakes unauthorized duplicate transactions on your card.

Cheque Fraud.
Altering the cheque (payee/amount) without authority
Duplication of cheques
Using false invoices to get legitimate cheques
Depositing a cheque into a third party account without authority
Depositing a cheque for payment knowing that insufficient funds are in the
account to cover the deposited cheque.

Electronic Fraud
A number of customers from Australian financial institutions have been
targeted with hoax emails. These emails appear to be genuine bank emails.
Some emails inform the customer that their security details and passwords
need to be updated by logging into an authentic looking, but fake website.
The purpose of these websites is to obtain your log on details to access
your bank accounts.
Others communicate security messages and advise you to install software
from the email that checks and removes viruses. By downloading the
software you are in fact tricked into downloading a virus.

Identity theft
Identity theft is where your personal details are obtained to get some sort
of financial or other benefit, leaving you the owner of that identity often in
large debt with a negative credit history and in some cases with legal
implications.
Your information can be obtained in many ways:
Theft, including theft of mail from your mailbox at home
By going through your garbage bins
Telephone, Fax and Mail scams
Internet.

Hassan Qamar

Frauds in insurance sector

We can identify three types of fraud in the insurance industry:
1. Internal fraud against the insurer committed by an employee;
2. Policy holder/claims fraud committed against the insurer, in the
purchase and/or execution of an insurance product by obtaining
wrongful coverage or payment; and
3. Intermediary fraud committed against the insurer or policy
holders by intermediaries independent broker/agent.

Combating insurance fraud

The following measures can be adopted to combat fraud in the
insurance sector:
1.Collection of proper evidence
2.Need for judicial co-operation

Types of Insurance Fraud

CAR INSURANCE FRAUD
HEALTH INSURANCE FRAUD
STAGED HOME FIRES OR STORM FRAUD

Farooq

INTRODUCTION TO
BIG BULL OF THE TRADING FLOOR

HARSHAD MEHTA

THE GREAT INDIAN SCAM -1992

HARSHAD MEHTA SCAM

WHO WAS HE?

Harshad Mehta
Started his career with new india assurance company
Quit his job in 1981 to become a sub-broker
Went bankrupt in 1982 and recovered soon to become more stronger
He wanted to become the most successful broker- there by he earned
the name of the big bull

HOW IT WAS DONE AND THE ROLE OF BROKER ?

Mehta soon masterd the tricks of trade by managering several
brokers and set out on dangerous game plan
Mehta has siphones off the huge money from several banks and
million of investors were in the process.
His scam was exposed and the market crashed.

EXPLOITING THE LOOP HOLE IN THE BANKING

SYSTEM
He triggered the rise in bombay stock exchange in the year 1992 by
trading in shares at premium across many segments
Taking advantages of loopholes in the banking system, harshad and
his associates triggered a securities scam diverting funds to the tune of
rs 4000 crores from the banks to stock holders between april 1991 to
may 1992

 He was arrested and baned for life from trading in the stock
markets
Major culprits were brokers, bankers and financial instutions.
He was charged with 72 criminal offences. A special court also
sentenced sudhir mehta, harshads brother, 6 others, including four
bank officials.

HIS FAVORITE STOCKS INCLUDED

APOLLO TYRES
RELIANCE
TATA IRON AND STEEL CO. (TISCO)
STERILITE
VIDEOCON

MARKET AT THE TIME OF

HARSHAD MEHTA SCAM

THE END OF BULL STORY

Lifestyle (flashy cars and life like a celebrity)
31st december 2001- the death of the bull
Forever remembered as the architect rs. 50 billion scam

conclusion
HARSHAD MEHTA was brave stock broker. He knew the loopholes in
banking system as well as how to exploit that loopholes. His who
intension to do this was to rise in sensex. (Security exchange old term of
index. Presently BSE)

Solutions
Ethical

Legal

Protecti
on

Apply laws

Social

Market

Education

Detection