Do financial, banking and capital markets supervisory institutions, including stock exchanges, investment funds, brokerage houses and offices, insurance companies, etc. effectively reduce the scale of unethical business practices in the capital markets?
In recent years, on the one hand, unethical business practices and practices incompatible with corporate social responsibility have continued to occur in the intermediation of financial, investment transactions concluded on the capital markets. On the other hand, there are also still situations confirming the thesis that the institutions of financial, banking and capital markets supervision, including stock exchanges, investment funds, brokerage houses and offices, insurance companies, etc., to a limited and incomplete extent reduce the scale of unethical business practices on the capital markets. Could this be a symptom of the impending next global financial crisis? The progressive deregulation and liberalisation of the rules of financial markets since the 1970s, including capital markets, stock exchanges, has generated an increase in risks in these markets and enabled unethical business practices in commercial banks, investment banks, brokerage houses and so on. In addition to this, the increasing scale of the use of insider trading in the context of financial transactions, speculative investments made using securities listed on stock exchanges and other assets, the objects of transactions in the capital markets has increased the scale of the volatility of these markets. The use of unethical business practices in investment banks, brokerage firms, credit advisors in commercial banks providing mortgages ... reduced vigilance in detecting such practices in financial supervisory institutions became some of the key factors in generating the global financial crisis of 2007-2008. Applied short positions to monetise declines in equity valuations, stock indices and other capital market assets. The above-mentioned practices, as well as unreliable credit advice, the granting of mortgages to uncreditworthy individuals and entities, the sale by brokers employed by investment banks of securities highly rated by the banks' cooperating rating agencies, which later turned out to be worthless securities, are important factors that generated the global financial crisis of 2007-2008. Of course, the key underlying factors that generated the global financial crisis of 2007-2008 are not only issues related to financial sector entities serving retail customers, not only to commercially operating financial institutions, investment banks, etc., but also to the financial system. The key factors that generated the global financial crisis 2007-2008 also include systemic factors, i.e. the above-mentioned deregulation and liberalisation of financial markets, the abolition of prudential instruments that were introduced after the Great Depression of the 1930s in order to make the financial system safer and to increase the scale of stability in the functioning of the economy. In addition, just before the global financial crisis of 2007-2008, the central bank pursued an excessively lax monetary policy and an additional governmental institutional guarantee system was created against financial transactions carried out in commercial and investment banks, which were undertaken with the acceptance of ever higher levels of credit risk, ever higher levels of leverage, ever lower levels of collateral for the transactions carried out, etc. In recent years, new financial markets have been developing, such as cryptocurrency markets. In addition to this, there have been situations in which the economic situation on specific capital markets, stock exchanges and cryptocurrency platforms has been influenced by posts and comments made by persons recognised by the media, who are also active on social media platforms, including Twitter tweets, which may have influenced the mood and investment decisions of many social media users and, at the same time, individual investors active on capital markets. On the other hand, there have been many instances of insider trading in capital market transactions. In order for financial markets, including capital markets to operate efficiently and effectively, financial, banking and capital markets supervisory institutions, including stock exchanges, investment funds, brokerage houses and offices, insurance companies, etc., should effectively detect such economic crimes, dishonest actions of some capital markets participants, non-compliance with the applicable legal norms, application of unethical business practices detect and reduce their scale. Financial supervisory institutions should reduce the scale of unethical business practices on capital markets. When financial supervisory institutions function efficiently, financial markets function effectively and financial crises occur less frequently.
In view of the above, I would like to address the following question to the esteemed community of scientists and researchers:
Do the institutions of financial, banking and capital markets supervision, including stock exchanges, investment funds, brokerage houses and offices, insurance companies, etc. effectively reduce the scale of unethical business practices in the capital markets?
What do you think about this topic?
What is your opinion on this subject?
Please answer with reasons,
I invite you all to discuss,
Thank you very much,
Best wishes,
Dariusz Prokopowicz
Not to the full extent. They can't due to either lack of resources to fight or knowing it is part of this business. They intervene when these practices cross a certain limit.
The presence of institutions overseeing the financial, banking, and capital markets can help reduce the prevalence of unethical business practices, but it is not guaranteed. These institutions are responsible for implementing rules and regulations to promote ethical behaviour and prevent corrupt practices, but the effectiveness of their enforcement can vary. Other factors, such as cultural and ethical values, economic incentives, and the level of transparency and accountability in the market, also play a role in determining the level of unethical behaviour in the capital markets. Ultimately, the decline of corrupt practices is a complex issue that requires the collaboration and commitment of multiple stakeholders. I hope it helps.
They can't, but their role is limited to identify faults, based on the published financial results and check with technical issues.
Not at all. Loom at manipulation of LIBOR, the London Whale, the central bank manipulation of currency and markets, the FDA accepting royalty payment to the people making decisions on which drugs to approve, the insider trading allowed by Congress and Senate, the abusive political agenda-driven regulatory framework to attempt to sway investment into ESG without any conception of what ESG really means, and the frauds purported by governments globally.
No - these are just bureaucratic sinkholes to steal more money without any real teeth and they go after whistleblowers, not the criminals.
yes, upto the most extent financial supervisory institutions may reduce the unethical business practices in capital market thorugh their supervisory and controlling power they can come up with more strict policies, regulations and practices to control the same.
My answer is yes. These supervisory governmental organizations are quintessential for the working of the system. PCAOB (Public Company Accounting Oversight Board) is the best example of it. SOX 2002 Law brought this supervisory institution to audit the audit work of auditing companies. It was passed as a result of the Enron auditing scandal of 2001 which wiped away one of the four biggest audit companies of the time-Arthur Anderson.
I will veer away from my usual style of answering these research questions, and I hope my usual interlocutors will not mjind this. This time I will simply make a strong recommendation that the following recently published book be read from cover to cover:
STUDIES IN MALTESE REGULATION: Financial Services Law
by David Fabri,
ISBN 978-00032-7-880-1
Published by Midsea Books, Malta.
This is a book which really analysis in depth the role of financial regulators, what should be their inspiring ethos and manners of operating, their environment, when, where and how they act with impact on consumers of financial services, the law and regulation, and all that revolves round these institutions.
After reading it i realise how much more seriously regulation needs to be taken in every country of this world of ours!
Dr. John Consiglio
Department of Banking & Finance,
The University of Malta.
To join the market they must follow reach the criteria which are regulated by the capital market committee, and other where look after their market regulation and policy. Additionally, to public their annual business performance, the certified external auditor responsible to review overall business activities. From my point of views unethical business practice cloud be reduced follows these conditions and improvement
The social views on unethical corporate behaviour. In practical, unethical business activities difficult to indicate. However it is sometime accounting to the opportunity in the market competition if there is no corporate act, company policy & regulation against those you mentions activities and prospective unethical behaviour. In the meantime, the company where operate their business with moral (market responsible) and maintain their corporate culture ethically. They they get a cheaper financial cost for their business operation, expanding the capital, and good image to investors, shareholders, stakeholders and colledge in the the market sector.
In short , the number of unethical business practice; if you mean the business entity (not a activity) possibly reduce unethical business activity, unethical management and so on from better market regulation and the competition behaviour of those financial products in the market. Check Basel4 the change finance service company r&p
They can do this effectively only on "old official" markets (stocks, bonds and so on) and can't do that on new markets (like CFD in 06-08, crypto in 17-...). They will always be late
Unethical business practices could violate deliberately the policies, creating unfair competition,making deception, loosing conscience and committments. Financial supervisory institutions can help to reduce to some extent.
Yes, financial supervisory institutions can effectively reduce the scale of unethical business practices in capital markets by enforcing regulations and monitoring compliance.