Pending experience and membership requirements, these successful candidates will become CFA charterholders starting in early October, bringing the number of charterholders worldwide to more than 125,000.

There are over 2,000 charterholders in Australia, most of whom are members of one of three societies within Australia, located in Sydney, Melbourne and Perth.

“The CFA charter is a commitment to uphold the highest standards of ethics, education and professional integrity.  Together charterholders join the CFA Institute effort to create an environment where investors’ interests come first, markets function at their best, and economies grow,” said Richard Brandweiner, CFA, President of CFA Society of Sydney.

“It is this foundation in ethics and education that we believe should be a benchmark for professionals working in the finance industry,” said Mr Brandweiner.

The CFA Program is a self-study program, considered to be the most rigorous credentialing program in the investment industry.   It is organised into three levels, each culminating in a six-hour exam. To earn the CFA charter, candidates must sequentially pass all three levels and they must also have four years of qualifying investment work experience.  Candidates must also commit to upholding the CFA Institute’s long-established Code of Ethics and Standards of Professional Conduct and renew this commitment annually.

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Anthony Serhan

More Australian asset managers should commit to global standards that outline the ethical and professional responsibilities of firms that manage assets on behalf of clients.

In the wake of high-profile investment scandals during the global financial crisis (GFC), the need for asset managers to demonstrate an unwavering commitment to high standards of ethical and professional conduct is paramount.

The Asset Manager Code of Professional Conduct (“the code”) was developed by the CFA Institute to enable organisations to commit to the same high standards required of individual CFA Charterholders.

“The initiative aims to encourage asset managers to commit to fairness and integrity in their dealing with investors and the broader financial community,” said Anthony Serhan, Managing Director, Research Strategy, Asia-Pacific at Morningstar and Vice President of CFA Society of Sydney.

“In Australia, as part of Investor First Week, we are encouraging Australian firms to commit to higher ethical standards in client relationships by signing up to the code,” said Mr Serhan.

Investor First Week is part of CFA Institute’s global Future of Finance initiative, a long-term effort to create a stronger ethical culture in the financial services industry. As part of the initiative, the Asset Manager Code of Professional Conduct requires managers to commit to the following professional standards:

• To act for the benefit of clients
• To act in a professional and ethical manner at all times
• To act with independence and objectivity
• To act with skill, competence and diligence
• To communicate with clients in a timely and accurate manner
• To uphold the rules governing capital markets

“Currently more than 950 asset management firms, investment firms, private banks and hedge funds in more than 30 countries have adopted the code. We are calling on more Australian asset managers to follow the lead of their global peers and raise the bar of conduct here,” he said.

Mr Serhan said the leaders of asset managers need to set examples of ethical conduct, which will then filter down through the business. “Importantly, ethical behaviour begins at the highest level of investment management organisations and requires a consistent, company-wide approach to keeping investor protection and the professional conduct of managers as top priorities.

“If leaders within an organisation can demonstrate a real commitment to ethics, managers and employees will follow that example. The starting point is a strong code of ethics that encompasses fundamental ethical principles.

“Trust is the most important factor for investors when hiring an asset manager, more important than the ability to achieve higher returns1. This first line of this code calls for managers to place client interests before their own, which seems like a great place to start if you want trust,” Mr Serhan said.

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1 CFA Institute & Edelman Investor Trusts Study 2013

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Professor Ning Jia rewarded for research into IPOs and cross-border factors.

CFA Institute, the global association of investment professionals, has recognised Professor Ning Jia of Tsinghua University in China for her work on the resources and strategies that foreign firms conducting an initial public offering can employ to reduce cross-border information friction and its associated costs.

Professor Ning Jia’s study demonstrated that a pre-IPO financing relationship with investors from the country of listing can effectively mitigate cross-border information asymmetries at the time of the IPO and reduce the cost of foreign equity issuance. Professor Ning is an associate professor of accounting and the associate director of the China Business Case Center at the School of Economics and Management of Tsinghua University.

“Professor Ning’s research provides important insights to issuers and investors, especially as more and more companies in Asia Pacific consider cross-border listings to raise funds and increase their market visibility,” says Paul Smith, CFA, managing director for Asia Pacific of CFA Institute. “We are delighted to honor Professor Ning and Tsinghua University for this valuable addition to academic literature and to the knowledge kit of global investment practitioners.”

The CFA Institute Research Prize is awarded to research projects that will further improve the standards of practice of the investment community in the Asia-Pacific region. A panel of scholars selected the winning paper based on value to practitioners, quality of content, readability, and presentation of the paper. The prize was awarded at the Australasia Finance and Banking Conference in Sydney, Australia on 18 December 2013.

“As the leader in education in the global investment community, the award from CFA Institute encourages scholars to deepen their inquiry into the issues that matter most to the capital markets and to practitioners,” says Professor Ning. “I’m honored that my work has been recognized by industry leaders.”

CFA Institute also recognized researchers from Sungkyunkwan University and Sogang University in South Korea with the Asia-Pacific Capital Markets Award. The study by Professor Tae-Jun Park, Professor Youngjoo Lee and Professor Kyojik Song on trading before earnings shocks provides insights on whether institutional investors trade profitably around positive or negative earnings surprises. The study demonstrated that the trading volume decreases only before negative events because of information asymmetry among investors. They also find that institutions sell their stock prior to an earnings shock, whereas individual and foreign investors do not anticipate the bad news. This paper will help individual investors learn from the trading behaviour of domestic institutions after the release of the trading volumes, especially before companies announce their earnings, so that the individual investors can improve their profitability.

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Gap between perception and behaviour of planners: CFA study

A study released yesterday by the Economist Intelligence Unit and sponsored by CFA Institute has shown that although financial services executives overwhelmingly recognise the importance of ethical behaviour in the industry, there is still a significant gap between that belief and the industry’s practices. The study, A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services, shows that strengthening culture based around driving integrity and financial knowledge across firms is a priority for the financial services industry.

Despite the importance placed on creating a stronger ethical culture since the financial crisis, a serious disparity still exists when it comes to executives’ recognition that adhering to those higher standards will help earn trust, foster career progress and support financial performance. Although 91% of survey respondents placed equal importance on ethical behaviour and financial success, more than half (53%) think career progression at their firm would be difficult without being “flexible” on ethical standards, and just 37% believe that their firm’s financials would improve if the ethical conduct of employees improved.

The study also looked at the critical issue of knowledge in the industry. Whilst 97% of respondents said that they are well qualified for their own role, 62% admit that their colleagues know very little about what goes on in departments beyond their own. This shows that a silo culture is pervasive in the industry, with departments acting unilaterally rather than viewing themselves as part of the wider business, suggesting integrated functional and management approaches to risk-proof organisations remains weak.

Paul Smith, Asia Pacific Managing Director of CFA Institute, commented:

“CFA Institute sponsored this study in order to take the temperature of the financial services industry as we begin to emerge from the financial crisis. The results show that the industry has further to go on its journey to drive up ethical standards and embrace professional education. It also shows signs of a shift in culture by recognizing the benefits of global ethical standards and industry knowledge, and addressing agency issues. If we are to move the industry forward it is incumbent upon everyone within the industry to align their personal and organizational values with those that serve client, shareholder and societal needs. Aspiring to adopt these values will create more resilient firms and a stronger future for finance.”

Statistical Highlights:

Ethics

• 91% of financial executives support the notion that aspiring to a globally recognised set of ethical standards would make the financial services industry more resilient
• 67% of firms have raised awareness of the importance of ethical conduct by all employees
• 53% of financial services executives say strictly adhering to ethical standards inhibits career progression at their firm

Financial Knowledge

• 62% of financial executives don’t know what is going on outside their department
• 61% of financial executives highlight gaps in employees’ knowledge as a significant risk for their firm
• 59% of financial executives agree improving knowledge of the industry as a whole would help make their firm more resilient
• 12% say they are confident in their knowledge of the global regulatory environment

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John Rogers

CFA Institute, the global association of investment professionals, says the world’s financial system is moving towards a new era of ‘fiduciary capitalism’ where large asset owners including Australian pension funds will lead the world towards sustainable long-term objectives and away from potentially damaging short-term profit motives.

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