This document discusses various types of financial scams and standards that aim to prevent them. It begins by defining scams as fraudulent schemes to obtain money or value through dishonest means, such as confidence tricks. Newer scams have emerged using technologies like email spoofing and scam baiting. To protect investors, financial institutions must apply ethical standards and comply with regulations like GAAP, IFRS, and Basel Committee recommendations. Oversight bodies like SEBI in India aim to prohibit unfair practices and promote transparency in capital markets. Upholding strict financial standards and regulations is important to safeguard public wealth and trust in financial systems.

1. UNIT 5
APPLICATION OF ETHICAL
STANDARDS TO FINANCE

2. .
WHAT IS A SCAM
A fraudulent scheme performed by a dishonest
individual, group, or company in an attempt obtain money
or something else of value.
Scams traditionally resided in confidence tricks, where an
individual would misrepresent themselves as someone
with skill or authority, i.e. a doctor, lawyer, investor. After
the internet became widely used, new forms of scams
emerged such as lottery scams, scam
baiting, email spoofing

3. .
>E MAIL SPOOFING: Email spoofing is the creation
of email messages with a forged sender address. It is easy
to do because the core protocols do not have any
mechanism for authentication
>E MAIL BAITING: Scam baiting is a form of Internet
vigilantism, where the vigilante poses as a potential victim
to the scammer in order to waste their time and resources,
gather information that will be of use to authorities, and
publicly expose the scammer.

4. .
Financial schemes may turn into financial scams which
may further destroy not only wealth but also lives of
the public
Investors may lose money and families
So every corporation have to apply ethical standards to
finance

5. .
FINANCIAL STANDARDS
In every business there are certain rules which are to
be followed . Money markets have more strict rules
and there are some fixed standards set both
nationally as well as internationally to regulate the
financial practices and processes
These rules and regulations are nothing but the norms
of applied ethics

6. .
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES( GAAP)
Every country through the body of chartered accountants
,formulated good accounting principles
GAAP INCLUDE standards , conventions and regulations for an
accountant to follow while preparing the financial
statements .
Following are the salient features of GAAP
1. Principle of regularity: It should be an obligation for every
company to prepare regular statements
2. Principle of consistency: The same methods should be
applied in the prescribed period of time
3. Principle of sincerity: The financial statements of the
company should reflect its true and real financial
statements

7. .
4. Principle of permanence of methods: There should
be regular publication of financial statements by the
company
5. Principle of non compensation: There should be
complete declaration of entire financial statements
with all the liabilities of company
6. Principle of prudence: No alterations in the financial
statements
7. Principle of continuity: Assets need to be shown at
the historical values and not at market value to avoid
manipulation
8.Principle of periodicity: Every transaction should have
a specific date or period

8. .
10. Principle of full disclosure : One should report
complete information of the financial position of the
company
So every company has to follow these rules and
regulations and the accountants are responsible for
preparing the financial statements scientifically and
reporting them to all the parties so that third party
should be able to rely and invest

9. .
INTERNATIONAL FINANCIAL REPORTING STANDARDS
As the GAAP provisions differ from country to country
So a body called IAS ( International accounting
standards ) was formed in 1973 and in 2001 a
committee was formed by the name of
IASC( International accounting standards
committee )by the IASB ( International accounting
standard board)
The objective of framing this was:
1.To promote the understanding of financial reporting
in accordance with good corporate governance
2. To encourage government to focus on need of
developing countries
3. To uphold public interest by defining the expectation
from both public and private sector

10. .
RESPONSIBILITY OF FINANCIAL INSTITUTIONS
Every investor put their hard earned money with a hope to
make some money by trusting in the ability and expertise
of the fund managers to give them dividends
UTI , a government undertaking know the fact that people
have more faith in their schemes than in those of the
private institute. This is because the government actions
are supported by all laws
So there are the financial institutions that manage people
money with a promise of growth and prosperity

11. .
Different banks and corporations have different objectives
IDBI ( Industrial development bank of India )
NABARD ( National bank for agriculture and rural
development )
EXIM ( Export and Import bank)
So all these banks have to follow different rules and
regulations in order to safeguard the interest of general
public

12. .
THE BANK OF INTERNATIONAL SETTLEMENTS ( BIS )
based in BASEL , switzerland formulates various
recommendations which are to be implemented by
all central banks in order to avoid risk and ensure
corporate governance
These recommendations are not mandatory for all
central banks on globe but whosoever countries are
the members of it have to follow those and India
become its member in 1992

13. .
The following are the responsibilities of the financial
institutions that perform banking duties:
a) To comply with all the corporate values , code of conduct
and the standards
b)To develop a corporate strategy against which the success
of the financial institution and the contribution of the
employees can be measured
c) Clear assignment of duties ,decision making authorities and
a hierarchy of approvals from every employee to BOD
d)An interaction session among members , BOD , managers
and auditors
e) To build a strong internal control system , internal and
external audit and risk management functions

14. .
f)Transparent flow of information both internally as well as to
the public

15. .
CAPITAL MARKET
MEAN: Capital market is a market where buyers and sellers
engage in trade of financial securities like bonds, stocks,
etc. The buying/selling is undertaken by participants such
as individuals and institutions.
The place where transaction take place is known as stock
exchange and in India there are nearly 2 dozen stock
exchanges and the oldest is the BSE
The SEBI ( securities exchange board of India ) is the market
regulator set by government of India in 1988 and the SEBI
act 1992 made it a statutory body and its headquarters are
in Mumbai . It has 3 regional office situated in Delhi ,
Kolkata and Chennai

16. .NATURE OF INDIAN CAPITAL MARKET
Indian capital market is classified into 2 sectors :
a) Organized sector include government and corporations
b)Unorganized sector include moneylenders
SEBI gives the guidelines or regulations for organized sector

17. .
Functions of SEBI
a) Regulating the securities exchange business
b)Registering and regulating the activities of stock brokers ,
sub brokers and all the intermediaries who deal with
securities
c) Registering and regulating the investment schemes
d)Promoting and regulating self regulatory organizations
e) Prohibiting unfair and fraud trade practices
f) Promoting investor education
g) Prohibiting insider trading
h)Levying fees or other charges
i) Regulating the acquisitions and takeover of companies
j) Conducting survey and inspection

18. .
As there has been financial scandals in the stock market at
regular interval and experts have complained that SEBI
does not have power to safeguard the market from
economic shock so it should be given power to take action
and give punishment

19. CASE STUDY
WHEN LIFE IS EQUALS TO MONEY