ETHICS AUDIT

PRESENTED BY ~
DEBADARSHI ROY RAHUL MISHRA ASHIS KUMAR DAS ANIMESH GHOSAL BARCELONA KHUNTIA ABHIPSA PATTNAYAK SANJEEV KUMAR (10DM074) (10DM078) (10DM079) (10DM081) (10DM082) (10DM091) (10DM093)

FEW STEPS TOWARDS ETHICS

What is Value?
It is the basic conviction that a specific mode of conduct or end-state of existence is personally/socially preferable of an opposite or converse mode of conduct or end state of existence. Values are long-lasting beliefs; evaluative standards that helps us define what is right or wrong, good or bad in the world.

VALUES @ A GLANCE

Loyalty to the Organization:

Being motivated yourself-Your own enthusiasm and commitment is contagious Pursuing total integrity as a core value of the organization and central to the delivery of community policing Setting challenging, realistic goals and objectives Improving the communication process at all levels is critical Treating each person as an individual and recognizing their respective skills

ETHICS AXIS

DISTRIBUTION

ETHICS MODEL

Identify pertinent ethical issues in their practice settings. What specific ethical risks do social workers face? Are there ethical issues that arise in the work that are unique to the client population, treatment approach, setting, program design, or staffing pattern?

PURPOSE

Review and assess the adequacy of their current practices. Has the practice setting addressed compelling ethical issues? How adequate are the current practices, policies, and procedures? What issues need to be addressed?
Design a practical strategy to modify current practices as needed. What steps does the agency or practice need to take to protect clients, prevent disgruntled parties from filing ethics complaints with state licensing boards and professional organizations, and prevent ethics-related lawsuits? Who in the practice or agency should work to address these issues? What resources will they need? What timetable should they follow? Monitor the implementation of this quality assurance strategy. How can practitioners ensure that the implementation plan has been implemented effectively? What indicators can staff members use to assess the extent to which the audit goals have been met?

STEPS FOR ETHICS AUDIT

Appoint staff members Identify ethics related issues Collect information regarding issue Identify the risk level Utilize the findings by taking necessary steps Identify a staff to monitor the implementation Document the complete audit process

What is Mutual Fund ?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them.

How mutual fund works:

Brief History of Mutual Fund

First Phase 1964-87 Second Phase 1987-1993 (Entry of Public Sector Funds) Third Phase 1993-2003 (Entry of Private Sector Funds) Fourth Phase since February 2003

Frauds associated with Mutual Fund

Churning \ Excessive trading: Churning refers to the excessive buying and selling of securities by a broker for the purpose of generating commissions and or fees and without regard to investors investment objectives. Fraudulent Material Misrepresentation : The broker falsified fact(s) about an investment. If investor had known the truth he would not have agreed to purchase the investment. Front Running: A stock broker buys or sells securities for their own account before executing orders previously submitted by their customers. After the broker has filled his clients orders, the broker closes out their position at a profit based on the new price level created the buying or selling of the clients orders.

 Fraudulent Material Omissions: The broker failed to inform you of facts concerning an investment. If you had known these facts you would not have agreed to purchase the investment. Unsuitable Recommendations: Brokers have an obligation to learn their clients financial needs, objectives and circumstances before recommending an investment. Unsuitable recommendations occur when the broker recommends an investment inconsistent with the clients financial needs, circumstances and objectives. Failure to Follow Instructions: The broker is instructed to buy or sell a security or follow a particular investment strategy. The broker ignores the instructions and does nothing or buys something else entirely.

 Unauthorized Trading: The broker buys or sells securities without written or verbal permission. Mutual Fund Abuses including, Mutual fund churning, Mutual Fund switching and Break point Selling. Fraudulent Asset Transfers: A brokerage firm operates under one name and incurs significant debts, liabilities and lawsuits. When the firm reaches a point they have to liquidate assets to pay their liabilities they close their doors and transfer the assets to a newly created firm with a different name. Both firms will have the same employees and principals.

 Break Point Selling: Mutual fund fraud arises when brokers, in order to maximize their commissions, recommend fund purchases at just below the break point or fail to recommend a suitable share class given the length of time a client anticipates holding the fund or sells a share class that is inconsistent with the clients objectives. Unscrupulous brokers maximize their commissions by failing to inform the client of the various methods commissions and expenses can be reduced. Negligence: Brokers have a duty of care to be reasonably diligent and prudent in the handling of client accounts Negligence occurs when the broker failed in his duty to be reasonably diligent or prudent and did not act as a reasonable and prudent broker would have acted in the same situation.

Aftermath of being unethical

CRB Group of Companies :1996 scam known as CRB scam: Chain Roop Bhansali was charged with Fraud, Cheating and Siphoning off of funds from SBI. Amount of Fraud: ` 12 Billion

AMFI
Association of mutual fund in India was established on 22 august 1995. It is the apex body of all asset management companies which are registered with SEBI. It follows the principle of both protecting and promoting the interest of mutual funds as well as their unit holders.

OBJECTIVE OF AMFI
It maintains high professional and ethical standard. It sets the code of conduct Interacts with SEBI and work according to SEBI guidelines It develops a trained agent distributor It promotes proper understanding of mutual funds It disseminate information on mutual fund industry

CODE OF ETHICS BY AMFI

Integrity (honesty) Due diligence Disclosure Professional selling practices Investment practices Operations Reporting practices Unfair competition Observance of statutes, rules and regulation enforcement

 Net worth of ` 7,911 crore

It sponsored by Kotak Mahindra bank ltd. Employs around 20,000 employees Has a distribution network of 1,716 branches, in India and Abroad. Has over 10 Lac investors in various schemes

Cases
Case 01
Kotak Mutual fund ,Somajiguda Branch have wrongly issued statement ( Saving A/c No 05520110010797. Investment a/c no. 502496, CRN no. 11919591).

Case 02
KOTAK Mutual FUND/KOTAK MIDCAP Regarding non credit of amount.

 HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999. Average Asset under Management: `93,105.58 Crs. No. of investors: 41,98,994 No. of ARN certified distributors - 32,570 (As on Sep 30,2010) Market share 11.8% No of complaints received 7763 (in 2009).

HDFC Mutual Fund

Case-1 Front Running Case Loss to HDFC mutual fund customers `2.38cr Nilesh Kapadia (Ass. Vice President) revealed advanced information to other market participants Case - 2 Redemption delayed Mr Mitesh Sampat give the redemption request on 2nd Jan,2009 HDFC Mutual Fund does not want to compensate him for delayed payment

 UTI Mutual Fund started in January 14, 2003 . It has a nationwide network consisting 148 UTI Financial Centres (UFCs) UTIAMC presently manages a corpus of over ` 65,38,724.42 lakhs as on 31st December 2010 (source: www.amfiindia.com)

UTI Mutual Fund

Cases: A person named as Tulika Saikia, Mumbai. He had applied for redemption of all units for his UTI Growth and Value Fund on 21st January, 2008. Till April his redemption was not made.

 According to economic bureau report on Dec. 2010, SEBI is upset over the complaints against some of the leading mutual fund players. According to Amfi records, 39 mutual fund houses have more than 4.5 lakh complaints against them. UTI Mutual Fund, tops the list with 99,347 such issues. The country's oldest fund house has received more than 30,900 complaints (22 per cent of the total)relating to non-receipt of dividends and another 16,700 marking non-receipt of statement of accounts

CORPORATE SOCIAL RESPONSIBILITY

Kotak Mahindra views Corporate Social Responsibility as an investment in society and in its own future. Kotak uses the power of its human and financial capital to help in transforming communities into vibrant, desirable places for people to live. The group leverages its core competencies in three areas: Sustainability Economic Development Doing My Bit

Awards
Outlook Money NDTV Profit Awards, 2009 ICRA Awards, 2006 & 2009 NDTV Awards, 2006 LIPPER FUND Awards, 2006 CRISIL BEST FUND Award 2003 OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003

Corporate social responsibility

ensuring children learn and the girl child projects, the bank has assisted in setting up a learning resource center LRC at a shelter home for street boys. The LRC houses a bank of materials, books, teaching and learning aids and aims to help expand the skill sets of underprivileged students.

HDFC Mutual Fund to launch cancer fund of `10 crore

HDFC Mutual Fund, the country's second largest fund house by assets under management, with active participation from Indian Cancer Society (ICS) and some noted oncologists in the city, will launch a 3year close-ended debt fund, christened HDFC Debt Fund for Cancer Cure The initial corpus will be invested into low-risk debt instruments in such a way that the initial capital will be fully protected. The dividend income that it would generate over its 3-year tenure, could be passed on to ICS, where a board of trustees will decide how to spend that money to help those cancer patients who need them the most. Investors will have the option to either donate the full dividend or half of it, and at the initial investment will be returned to them at the end of the third year.

AWARDS
HDFC Mutual Fund was the Winner of "India Equity Fund House" Award (from amongst 9 fund houses) for the one year period ending December 31, 2009 at the Morningstar Fund Awards (India) 2009. HDFC Cash Management Fund - Treasury Advantage Plan - Growth Option was the runner up in the India Open-Ended Ultrashort Bond category (from amongst 28 schemes) for the one year period ending December 31, 2009 at Morningstar Fund Awards (India) 2009. Prashant Jain of HDFC won the award for the best equity fund manager

CORPORATE SOCIAL RESPONSIBILITY

One in every 6 people over the age of 60 in the world lives in India. The aged of today have no choice but to depend on their own lifetime savings to survive for nearly 20 years if they stop working at age 60. We are likely to have nearly 20 crore elderly in India within the next 2 decades. Of the 36 crore paid workers in India today, only 11% belong to the organised sector.

Details of Micropension Initiative

Arrangement with: Union Bank of India, The Bihar State Co-operative Milk Producers Federation Ltd.(COMPFED), Paradeep Port and Dock Mazdoor Union, Bank of India, Shree Mahila Sewa Sahakari Bank Ltd. and Self-Help Promotion for Health and Rural Development (SHEPHERD)

'Swatantra'
UTI Mutual Fund announced their tie-up with HDFC Bank for its Investor Education Initiative called "Swatantra" in the states of Kerala, Karnataka and Tamil Nadu. This initiative aims at creating investor awareness about different financial products and wealth creation options. Innovative formats will be used for communicating about financial products like mobile banking, web campaigns, face book, twitter, financial calculators and planners.

AWARDS
Second time in a row, UTI Mutual Fund has been awarded the Most Investor-Friendly Fund House of the Year by CNBC-TV18-CRISIL Mutual Fund Awards 2011. Mr Jaideep Bhattacharya, Chief Marketing Officer, UTI AMC 's CMO has won MYKM Stars of Industry Youth Icon Award from 94.3 Radio FM. UTI Dividend Yield Fund has been adjudged the The Best Large Cap Fund by Morningstar Fund Awards (India) -2011. UTI Equity Fund has been adjudged The runner-up for the Best Large Cap Fund by Morningstar Fund Awards (India)-2011. UTI AMC has won the Golden Peacock Innovation Award 2011 for its Investor Education initiative Swatantra.

Suggestion:
Technology To have an Ombudsman for Investors grievances Regulators should do an audit at regular interval to check the source of AUM