Responding to Fallout from the Financial Crisis

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By Bob Luck, CPA, CFA

The financial crisis and collapsing asset values have led to a substantial loss of trust by investors in both their investment managers and massive regulatory reform efforts. Whether the magnitude of these responses is warranted has been the subject of great debate, but both stand to impact the investment profession in negative ways. In an interactive session at the 64th CFA Institute Annual Conference, Jon Stokes, head of Standards of Practice at CFA Institute, explained some of the ways in which CFA Institute is responding to these challenges and arming members and other investment professionals with the tools to make a difference themselves.

Stokes explained the CFA Institute view that effective self-regulation can lead to improved financial market integrity and help to stave off the heavy hand of regulators. The fundamental values of ethics and integrity have always been embraced by individual CFA charterholders, as codified in the CFA Institute Code of Ethics and Standards of Professional Conduct. Several new firm-friendly codes of conduct have been developed based on those same principles. Stokes explained that the Asset Manager Code of Professional Conduct (AMC) was developed to enable firms to adopt the same firm-wide standards that individual CFA charterholders adhere to: “Demand for the AMC developed several years ago as CFA Institute members were looking for ways to raise the commitment at their own firms towards ethical practice.”

Two related institution-focused products covered in the presentation were the Pension Trustee Code of Conduct and Endowments Code of Conduct. Stokes discussed the significance of each and their applicability for use by trustees who govern pension funds and endowment funds. Each code was developed in an effort to resolve the lack of professionalism and client (beneficiary) focus that historically has been present for these institutions. Teams of practitioners drawn from the ranks of pension and endowment fund sponsors worked to create these codes, and adoptions for both are rising. “No code of conduct can prevent fraud, but they do provide a framework for ethical professional practices,” Stokes explained.

Continue reading on the CFA Institute Market Integrity Insights blog.

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