Corruption and Fraud in Financial Markets

Identifying malpractice and misconduct should be top priority for financial risk managers today

Corruption and Fraud in Financial Markets identifies potential issues surrounding all types of fraud, misconduct, price/volume manipulation and other forms of malpractice. Chapters cover detection, prevention and regulation of corruption and fraud within different financial markets. Written by experts at the forefront of finance and risk management, this book details the many practices that bring potentially devastating consequences, including insider trading, bribery, false disclosure, frontrunning, options backdating, and improper execution or broker-agency relationships.

Informed but corrupt traders manipulate prices in dark pools run by investment banks, using anonymous deals to move prices in their own favour, extracting value from ordinary investors time and time again. Strategies such as wash, ladder and spoofing trades are rife, even on regulated exchanges – and in unregulated cryptocurrency exchanges one can even see these manipulative quotes happening real-time in the limit order book. More generally, financial market misconduct and fraud affects about 15 percent of publicly listed companies each year and the resulting fines can devastate an organisation's budget and initiate a tailspin from which it may never recover.

This book gives you a deeper understanding of all these issues to help prevent you and your company from falling victim to unethical practices.

• Learn about the different types of corruption and fraud and where they may be hiding in your organisation
• Identify improper relationships and conflicts of interest before they become a problem
• Understand the regulations surrounding market misconduct, and how they affect your firm
• Prevent budget-breaking fines and other potentially catastrophic consequences

Since the LIBOR scandal, many major banks have been fined billions of dollars for manipulation of prices, exchange rates and interest rates. Headline cases aside, misconduct and fraud is uncomfortably prevalent in a large number of financial firms; it can exist in a wide variety of forms, with practices in multiple departments, making self-governance complex. Corruption and Fraud in Financial Markets is a comprehensive guide to identifying and stopping potential problems before they reach the level of finable misconduct.

CAROL ALEXANDER, Ph.D., is Professor of Finance at the University of Sussex, Visiting Professor at Peking University PHBS Business School in Oxford and Co-Editor of the Journal of Banking and Finance. She is the former Chair of the Board of the Professional Risk Manager’s International Association and she consults on model design for major exchanges, banks, and fund managers worldwide. She has edited more than a dozen books in finance and risk management and her sole-authored four-volume textbook on Market Risk Analysis (Wiley, 2008) remains the definitive guide to the subject after more than 12 years in print.

DOUGLAS CUMMING J.D., Ph.D., CFA, is the DeSantis Distinguished Professor of Finance and Entrepreneurship at the College of Business, Florida Atlantic University, and Visiting Professor of Finance at Birmingham Business School, University of Birmingham, and Royal Melbourne Institute of Technology. He has published 18 books and over 185 articles in leading journals such as the Academy of Management Journal, Journal of Financial Economics, and Review of Financial Studies, which have been cited over 15,000 times. He is the Managing Editor-in-Chief of the British Journal of Management and Journal of Corporate Finance, and the Founding Editor-in-Chief of the Review of Corporate Finance.

PRAISE FOR CORRUPTION AND FRAUD IN FINANCIAL MARKETS "Financial market fraud and corruption are undoubtedly costly to investors in developed and developing countries around the world. In the ongoing fight to mitigate those costs, this book is a valuable resource - it provides deep insights and helpful tools for all pertinent stakeholders." --John Archibald, Principal, Investigation Counsel P.C., Toronto, Canada "The best new research resource in 40 years for those concerned with transparency, compliance, and enforcement in financial markets due to fraud and corruption. Crypto, manipulation, non-disclosure, illegal trading and other evils to the market have been around for a long time. Now, finally, there is a comprehensive study to guide the good - lawyers, financial practitioners, policymakers, students, academics, and enforcement authorities." --Paul Bates, LL.M., Barrister, Canada and U.K., , Outer Temple Chambers, London U.K. "This book offers many useful insights on corporate fraud and securities market manipulation. The chapters prepared by world leading academics and practitioners assess the determinants of fraud and manipulation, the associated costs, and the regulatory responses in different countries around the world. I believe it is a vital resource for academics, practitioners, and policymakers alike." --Prof. Jeffrey G. MacIntosh, Professor & Toronto Stock Exchange Chair in Capital Markets Law; Faculty of Law, University of Toronto "This essential text covers the entire ground of financial market fraud and misbehaviour, including important related areas such as misleading financial reporting and bribery. It is a key resource for those working in financial markets, law, public policy, and academia." Capital Markets Law; Faculty of Law, University of Toronto --Bryce C. Tingle, N. Murray Edwards Chair in Business Law, University of Calgary; Director - Financial Markets Regulation Programme, The School of Public Policy "Growing evidence of high-level corruption in some of the most developed states, market turbulence and the role of vested interests in both contributing to the causes and benefitting from such crises, makes the study of fraud malpractice in financial markets ever more important. This collection is both timely and prescient, and advances our understanding around a broad range of salient issues." --Prof. Geoffrey Wood, DanCap Chair of Innovation and Head of DAN Management, Western University, Canada; Visiting Professor, Trinity College, Dublin

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