Business Operations: Financial Issues

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Business operations: Financial issues Introduction The problem to be investigated was the outcome of the ethical dilemma that occurred within the business circle leading to the violation of financial regulations and consequently eroded the confidence of shareholders on the U.S capital market. Examples of the violation of financial regulations were Enron, WorldCom and Lehman Brothers scandals that led to the collapse of the three companies. To restore the public confidence of the U.S capital market, the Senate intervened by passing the SOX (Sarbanes Oxley) Act of 2002 or Investor Confidence Act. In the Section 4.11 of the case, there are issues and activities covered by SOX that could have been handled as ethical and resolved voluntarily. Answer to Question 1 One of the ethical issues covered by SOX that could have been resolved voluntarily was the conflict of interest that led to the failure of security market leading to the collapse of Enron, WoldCom and other companies. The conflict of interests is in the stock research industry, which was part of the function of investment and brokerage banking. However, SEC is in process of addressing the following conflict of interests: Approval of research reports and prepublication clearance initiated by investment bankers. Compensation, supervision, and evaluation of securities analysts by investment and brokerage bankers Investment banker's retaliation against a securities analyst due to an unfavorable research
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