Answer to Question #203870 in Management for Prabhdeep Singh

Question

Subject : Business Ethics and Corporate Governance

What are the ethical issues in the functioning of capital markets? What are the consequences if these issues are not addressed properly? ( please give at least 7 points for issues and 7 points for consequences with elaboration )

Answer 1

The ethical issues in capital markets include; Scams, unfair trading practices, churning by sales representatives, insiders trading, securities scams, frauds and window dressing. some of the consequences include;

• There will be loss of investor trust in the capital markets if there is no transparency in the capital markets.
• There will be low customer retention since most people do not wish to be associated with inefficient systems.
• There might be lawsuits or severe actions in form of fines from the government or relevant authorities.
• It might also lead to closure of businesses where the laws are strict on such violations.
• it leads to loss of credibility for the parties involved.
• it damages employee relations in the companies involved especially if only a small portion participates in unethical practices.
• Employee performance is also affected by the violations of the ethical issues since if they lead into a lawsuit, they will be spending much time handling the cases than being involved in productive works.