Merger Offers and Fraudulent Schemes Quiz

FIN 3103 Study Notes

This course covers weeks 2 and 3 of Corporate Governance, ethics, Sharia Law & Professional Qualifications, Unit 4.
The topics covered include risk management and fraud prevention.
Risk is defined as the probability of damage, injury, loss, or any other negative occurrence caused by external or internal factors, that may be avoided through pre-emptive action.
Risks in a business organization stem from differing sources such as financial uncertainty, fraudulent behavior, strategic management errors, accidents, natural disasters, IT security threats & data-related risks.
Risk management is a 5-step process including identifying, analyzing, assessing/evaluating, mitigation/minimizing/managing and monitoring risk.
Risk management plans follow these 5 steps: Risk Identification, Risk Analysis, Risk Assessment, Risk Mitigation and Risk Monitoring
Risk appetite is the amount and type of risk that the business organization is willing to take on to meet its objectives.
Risk appetite levels include; Averse, Minimal, Cautious and Hungry
Fraud is a deliberate act of deception to gain unfair or unlawful gain.
Fraud risks within an organization include fraudulent financial statements, corruption & bribery, and asset misappropriation or theft.
Fraud preventative controls are measures aimed at preventing or reducing opportunities for fraud.
Preventative controls/measures include; code of conduct/ethics, anti-fraud training, criminal background checks for current prospective employees and internal controls.
A code of conduct/ethics is a set of standards expected of employees in the organization, like not accepting gifts from clients in order to meet its business objectives.
Unit 5 of the course covers CFA professional standards.
The CFA Institute promotes ethics, integrity and professional excellence.
CFA professional standards apply to members & candidates.
Paragraphs A & B, of CFA Standard I define material nonpublic information, and the definition of an insider.
The difference between Investment & Commercial Banking is covered.
The Chartered Financial Analyst (CFA) Program is a professional credential offered internationally by the American-based CFA Institute to investment and financial professionals.
Topics covered under the CFA Program include ethics, quantitative methods, economics, corporate finance, financial reporting & analysis, security analysis and portfolio management.
To become a member of CFA Institute, one must complete all three levels of the CFA Program, have four years (48 months) of qualified work experience, and adhere to the CFA Institute Code of Ethics and Standards of Professional Conduct.
The ethics section of the CFA exam is primarily concerned with compliance and reporting rules when managing investor's money.
Members of the CFA Institute must act with integrity, competence, diligence, respect, and in an ethical manner with the public, clients, etc.
The financial services industry provides businesses that manage money to provide financial advice such as insurance companies, investment banks, commercial banks, financial advisors and stock brokerages.
CFA Standard I - Professionalism, including Knowledge of the law, Independence & Objectivity, Misrepresentation & Misconduct.
CFA Standard II - Integrity of Capital Markets.
Material information would include; dividend increase, decrease or omission, quarterly earnings or sales significantly different from consensus, changes in management, major development specific to industries like housing starts, employment, etc. and major acquisitions or divestitures of organizations.
Nonpublic information is information that has not been disclosed to the general public.
Insider is any person who possesses access to valuable non-public information about a corporation, or ownership of stock that equals/exceeds 10% of a firm's equity.
Examples of insider trading cases like Levine, Siegel, Boesky, and Milken.
Market manipulation is an intentional act to artificially increase or decrease a security's price. This is considered illegal.
Forex scandal is where banks secretly conspired for at least a decade.
Citigroup and JP Morgan Chase & U.K.-based Barclays and The Royal Bank of Scotland agreed to plead guilty to conspiring to manipulate prices in the foreign exchange market.
CISI Institute is the professional body in securities, investment, wealth & financial planning, formed in 1992 by London Stock Exchange practitioners.
The ethics section of the CISI exam is primarily concerned with compliance and reporting rules when managing investor's money, as seen in the UAE's Financial Rules and Regulations.
Professionals within financial services owe important duties to their clients, the market, the profession and society.
The five main objectives of Shari'ah or maqasid shariah are to protect public interest, including; Religion (Din), Life (Nafs), Intellect (Aql), Family (Nasl), and Property (Mal).
The core concepts of corporate governance include accountability, fairness, transparency, independence, sustainability, good board practices, control environment, openness, reputation, and stakeholder interface.
Corporate Governance comprises of a company or entity - an artificial person created by law with perpetual succession.
Directors, the managers of the company, shareholders and stakeholders are part of corporate governance.
The guiding rules that separate powers among stakeholders.
Internal control has to be in accordance with UAE Federal Law No. 4.
A detailed analysis of past year and planning, forum for critical accounting issues/policies, internal controls, external audit and reviews, etc are parts of internal control.
There are two types of auditors - internal and external ones; Internal & External Auditors.
Common ethical issues among stakeholders include the guiding rules that separate powers among stakeholders, such as the organizational memorandum of association, UAE Federal Law and the country's financial rules and regulations. Financial statements, internal, and external audit related to companies in the UAE, should be covered by Federal Law No. 4 of 2000, and 2015 articles 7 and 6.
Some additional topics include the overview of money in Islamic perspective as well as the rules regarding Islamic finance that covers the prohibition of riba, gharar and maysir; in addition to the history and advantages of Islamic money.
Other contracts used in Islamic finance include Kafalah, Hiwalah, Al-Rahn, Wadiah, Qard al-hassan and Wakalah.
Types of sales that include Bay al-Murabahah, Bay al-Istisna ', Bay' al-Salam (which is forward sale) Bay' al-Dayn (Debt), and Bay' al-Innah
Methods for termination of contracts include; By performance, express agreement, operation of the doctrine of frustration and breach.
There is a different types of Khiyar in the Islamic law, including, Khiyarul Majlis, Khiyarul Sharat, Khiyarul Ru'ya, Khiyarul Naqd, and Khiyarul Wasf.