Banking Principles A sound regularly framework in regulating capital markets is expected to provide transparency, maintain market integrity, fairness and ensure investor protection. However, lack...

Banking Principles

A sound regularly framework in regulating capital markets is expected to provide transparency, maintain market integrity, fairness and ensure investor protection. However, lack of adequate regulations can lead to manipulations which endanger the integrity of the market and damage the confidence of investors and market participants in India? Please help me elaborate this question.

 


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amy-lepore's profile pic

amy-lepore | High School Teacher | (Level 1) Educator Emeritus

Posted on

I don't think this is only in India.  Lack of adequate regulations and/or a checks and balances system will allow those with overambitious, greedy natures to find loopholes and to manipulate the system.  Take a look at the Enron scandal and other such scandals on Wall Street.  It is the nature of the beast to find the easy way to make millions.  It takes a strong person to resist the temptation to steal others' money when the person is bright enough to challenge the system and not get caught.

promptmascot's profile pic

promptmascot | Student, Undergraduate | (Level 1) eNoter

Posted on

Whenever there are possibility of making money easily without creating any value for other in return, the temptations of manipulations, foul play, and dishonesty are unavoidable. Capital markets provide a very good breeding ground for such opportunities of easy money and the attendant temptations of indulging in manipulative and dishonest practices.

I am not saying that capital markets are completely bad or undesirable. The capital markets serve a very useful function of directing savings of of individuals for investment in useful business enterprises. Therefor capital markets are essential in economy. All that I am saying that existence of malpractices in capital markets is not a sign of lack of effective regulations. As a matter of fact most of the regulations follow the detection of malpractices, and as new laws are implemented to plug the loopholes detected, people find ways new of beating the law. Thus good laws will definitely help to improve the operations of capital markets, but I do not see a situation when the working of the capital market will become completely fair and honest. Thus the common investors would do well not to get carried away by prospect of windfall return, And put themselves in situations where they do not have the capacity to bear the risk of failure. There are no assured successes in capital markets.

 

 


I have doubt, the question says at the end that lack of adequate regulations can lead to "manipulations which endanger the integrity of the market and damage the confidence of investors and market participants in India"

How do investors or market participants judge that the market they are entering is safe, what are the norms they look for inorder to participate.

it would be very grateful of you, if you clarify my doubt

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

Whenever there are possibility of making money easily without creating any value for other in return, the temptations of manipulations, foul play, and dishonesty are unavoidable. Capital markets provide a very good breeding ground for such opportunities of easy money and the attendant temptations of indulging in manipulative and dishonest practices.

I am not saying that capital markets are completely bad or undesirable. The capital markets serve a very useful function of directing savings of of individuals for investment in useful business enterprises. Therefor capital markets are essential in economy. All that I am saying that existence of malpractices in capital markets is not a sign of lack of effective regulations. As a matter of fact most of the regulations follow the detection of malpractices, and as new laws are implemented to plug the loopholes detected, people find ways new of beating the law. Thus good laws will definitely help to improve the operations of capital markets, but I do not see a situation when the working of the capital market will become completely fair and honest. Thus the common investors would do well not to get carried away by prospect of windfall return, And put themselves in situations where they do not have the capacity to bear the risk of failure. There are no assured successes in capital markets.

 

promptmascot's profile pic

promptmascot | Student, Undergraduate | (Level 1) eNoter

Posted on

Thank for the response , appreciated , But im in search of much detail aspect of the above question i posted .

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