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Sarah Peck is the author of Investment Ethics, published by Wiley.
Preface | |
Ethical Behavior | |
Introduction: The Case for Investment Ethics | |
Introduction-The Investment Industry- A Legacy of Scandals and a Need for Ethics | |
A Brief Overview of the Investment Industry | |
Securities Laws and Regulations | |
Investment Ethics Are Easier Said Than Done | |
Ethics Basics | |
Four Fundamental Principles of Investment Ethics | |
Costs and Benefits of Being Unethical | |
Conclusion-Developing an Ethical Consciousness | |
Appendix- Financial Market Regulatory Agencies | |
Fiduciary Duty of Investment Professionals- The Ethical Treatment of the Client | |
Introduction- What is A Fiduciary? | |
Agency Versus Fiduciary Relationships | |
The Role of Laws, Regulations, and Professional Standards | |
The Importance of Confidentiality | |
Conflicts in Finding the Right Investments | |
Conflicts in Trade Management- Best Execution | |
Conflicts in Trade Management- Soft Dollars | |
Identification and Fair Treatment of Clients | |
Conclusion-Disclose! Disclose! Disclose! | |
Appendix- Professional Codes of Ethics | |
Ethical Reporting of Investment Performance | |
Introduction to Ethics in Reporting Performance | |
Calculating Return: Predicting Future Performance or Measuring Performance for Current Clients? | |
Ethical Reporting of Risk Measures | |
Management Fees and Other Costs That Can Be Hidden | |
Time Periods Used to Estimate Historical Risk & Return Performance | |
Other Ways to Distort Historical Performance | |
Reporting Performance to Attract New Clients- Cherry Picking Accounts | |
Hidden Risks: Leverage, Short-Selling, Liquidity | |
Special Considerations with Valuing Securities that Don't Trade | |
Conclusion- The Crystal Ball | |
Appendix- Review of Investments Basics | |
Ethical Use of Information | |
Introduction- Information and The Search for Alpha | |
Information Asymmetry | |
Private Information-Talent | |
Trading On Inside Information | |
Trading on Trading by Insiders | |
Influential Publications | |
Direct Communication with Corporations | |
Investment Banking and Chinese Walls | |
Mosaic Theory | |
Front Running | |
High Speed "Flash" Trading | |
Mutual Funds And Information Advantages Arising From Stale Prices | |
Market Manipulation | |
Conclusion- Information And Fairness | |
Analyst Integrity | |
Introduction- Analysts and Their Ethical Obligations | |
Investment Recommendations-"Pickers" | |
Forecasters | |
Buy Side and Sell Side Analysts- Who pays for the research? | |
Behavioral Finance and Analyst Ethics | |
Star Analysts- Overconfidence and Regret Aversion | |
Herding -The Influence of Other Analysts | |
Other Behavioral Pitfalls | |
Originality of Ideas | |
Other Analyst Conflicts | |
Conflicts with Employers | |
Conclusion- Be Aware! | |
Ethical Security Analysis | |
Investing in Companies with Ethical Accounting Practices | |
Introduction- Reported Accounting Performance- Healthy Cynicism | |
The Source of Accounting Distortions-Accruals | |
Discretionary and Non-Discretionary Accruals | |
Managers' Incentives to Manage Earnings"Cookie Jar" Reserves and "Big Baths" | |
Aggressive Revenue Recognition | |
SPE's and Hidden Debt | |
Quality of Earnings | |
Earnings Smoothing: Is It Ethical? | |
Conclusion- Cash Versus Accruals- Be Skeptical! | |
Investing in Companies with Good Corporate Governance Practices | |
Introduction-Corporate Governance and its Importance to Ethical Analysts | |
Countrywide Financial Corporation- A Case of Weak Corporate Governance and Unethical Business Practices | |
The Role of the Board- An Overview | |
Who Makes a Good Director? | |
Effective Board Structure | |
Director Compensation and Shareholdings | |
The Nominating Process, Voting Rights, and Potential Conflicts | |
Executive Compensation- Structure and Incentives | |
Option Grant Abuses | |
Golden Parachutes, Golden Hand-cuffs, Golden Coffins | |
Horizon Problems And The Firm's Long-Run Profitability | |
Shareholders' Rights and The Takeover Market | |
Conclusion- Shareholder's Rights and Conflicts | |
Appendix- Review of Stock Options | |
Socially Responsible Investing | |
Introduction- Directing Financial Capital to Benefit Society | |
Stakeholder Theory | |
Positive and Negative Screens | |
Socially Responsible Mutual Funds | |
Performance- Can You Do Well By Doing Good? | |
Shareholder Advocacy | |
Divestment | |
The Special Role of Pension Funds, University Endowments, and Foundations | |
Community Investing and Micro Finance Lending | |
Islamic Finance | |
Conclusion- Obstacles To Doing Well While Doing Good | |
Cases | |
UBS and Morgan Stanley- An Elaborate Insider Trading Scheme | |
Emulex and Mark Jakob- Market Manipulation with False Information | |
Fidelity Traders and Gifts from Jefferies- Soliciting Brokerage from Traders | |
Heartland Advisors and Bond Funds- Misrepresentation of Bond Values | |
A.G. Edwards and Variable Annuities- An Inappropriate Investment | |
Charles Hintz and Sanford Bernstein- Analysts' Conflicts with Personal Holdings | |
Nicholas Cosmo and Agape World Inc .- A Ponzi Scheme | |
Former CEO of NYSE's, Grasso's, Pay Package | |
Nick Leeson and Barings Bank- Rogue Trader | |
Kellogg's "Matched" and "Washed" Trades- Tax Avoidance or Market Manipulation? | |
- Qwest Communications International - Accounting Fraud and Overstated Revenues | |
Refco- Misrepresentation and Hidden Debt | |
Salomon Brothers and the Treasury Market- Cornering the Market | |
Merrill Lynch and the Internet Boom- Analysts' Conflicts | |
John Mangan and Short Selling -Inside Trading | |
Merrill Lynch and Bank of America Merger- Bonuses Paid to Merrill Employees -Excessive Compensation? | |
Canary Capital Partners LLC- Mutual Fund Abuses | |
Jérôme Kerviel and Société Générale- Rogue Trader | |
WorldCom- Capitalizing Operating Expenses, an Unethical Accounting Practice | |
The Squawk Box- Front Running | |
Morgan Stanley- Brokerage Commissions and Brokerage Abuses | |
Brian Hunter and Amaranth Advisors-Market manipulation of Natural Gas? | |
The Bayou Group- False Reporting | |
Morgan Stanley- Analyst's Coverage and Investment Banking Business | |
Bernie Madoff- The Largest Ponzi Scheme in History? | |
Enron- A Case of Extreme Hubris | |
UnitedHealth- Back Dating Stock Options | |
First Cash Financial Services- Pay Day Loans and Return | |
Johnson & Johnson and the Tylenol Scare- Did Recall Hurt or Help Shareholders? | |
Infrastructure Funds- An SRI Investment? | |
Glossary | |
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