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Advocacy Update


May 2008

 

Top Story / Featured Product:
Battling Subprime: Advancing Fair Value to the Frontlines
Is the Centre fighting fair on fair value?

 

Over the past months we have continued waging our battle in defense of those investor protections that will help shield the industry from future failings of the type that led to the subprime fiasco. We are supporting the realistic and transparent reporting only available with fair value accounting; have reminded the world’s markets that fair value represents a solution to rather than cause of market distress; led global discussions on regulatory reform to heal the subprime-scarred world markets.

 

Our most recent battle cries have been:

 

The Centre takes each stand armed with a wealth of resources informing and validating our positions. CFA Institute Centre publications — our codes, standards, and guidelines — have been central to our efforts seeking solutions to the subprime crisis. Our advocacy on subprime-related topics demonstrates the practical application of the research and standards we publish. All offer timely and relevant direction for addressing — or better yet, preventing — crises in the capital markets.

 

Lately, Centre outreach has particularly drawn on:

 

Along with research and publication of industry standards, and outreach on current industry concerns to regulatory and trade organizations, the Centre works through commentary in the press to promote market integrity. The CFA Institute Centre hosted an April media roundtable to reinforce our positions on the clear need for fair value accounting, to address risk management as it relates to fair value, and to renew our calls for improved transparency in reporting to aid investors. The event drew a range of media coverage, including mentions by Investment News, Accountancy Age, the Economist, Newsweek, BusinessWeek, Les Echos, Reuters, Advisor.ca, and CFO.com, further strengthening our ability to advocate for investor protections in market practices.

 

As with any issue we address, our subprime work is further informed by input received from investment professionals, and our outreach is enhanced by your local advocacy efforts; we encourage you to contact the Centre with your ideas and concerns. In the March issue of his monthly member newsletter, CFA Institute President and CEO Jeff Diermeier, CFA, gathered some interesting input for us when he asked: “Do fair value requirements for financial institutions improve transparency and contribute to investor understanding of the risk profiles of these institutions?” Nearly 80 percent of the 2,000 respondents believe that fair value requirements for financial institutions do improve transparency and contribute to investor understanding of risks. Members were not as decisive about the relationship between fair value accounting and the subprime fallout; view full results.

 

We will continue leading the charge for wider recognition and adoption of the high ethical standards outlined in each industry guide produced by the Centre, providing recommended best practices as we continue battling those issues — as with subprime — that affect the markets.

 

In Other News

 

GIPS Standards in the News
The (US) President’s Working Group on Financial Markets Investor’s Committee recommends in its report Principles and Best Practices for Hedge Fund Investors that investors require hedge fund and hedge fund of fund managers to comply with the Global Investment Performance Standards (GIPS). Learn more.

 

In a recent comment letter (PDF) to the National Council of Real Estate Investment Fiduciaries (NCREIF) the GIPS staff applauded the efforts of the Real Estate Information Standards (REIS) Board and Council to venture further into the area of investor reporting and offered suggestions on how to make the proposed Fund Reporting Standards (PDF) even stronger.

 

You may now subscribe to receive GIPS news and updates via RSS feed; view other news and events.

 

Stop by to Visit in Vancouver
If you will be in Vancouver this month for Society Leader meetings and/or the CFA Institute Annual Conference, please attend one of our sessions to learn more about XBRL, executive compensation, financial reporting, or an overview of Centre activities.

  

Financial Reporting News
In late April the Centre’s Financial Reporting Policy Group and the Corporate Disclosure Policy Council held meetings in London with the International Accounting Standards Board (IASB), the Corporate Reporting Users Forum (CRUF), and the CFA Society of the UK. These meetings were held to discuss selected IASB projects including financial instruments, pensions, consolidations, financial statement presentation, and other financial reporting topics of importance to investors. In addition, the meetings provided a means for the Centre to further develop existing relationships with each of these groups.

 

We will shortly be bidding a fond farewell to Georgene Palacky, who has been director of the Centre's Financial Reporting Policy Group since 2005. During her tenure, the Centre's work on financial statement issues has broadened, our relationships with key, standard-setting organizations such as FASB and IASB have strengthened, and media coverage of our financial reporting positions and publications has deepened. Many thanks and best wishes to Georgene in her next endeavors.

 

Update from the APAC Region
The Indonesian Ministry of Finance's capital markets supervisory agency, Bapepam, created a new licensing category for fund managers serving high-net-worth clients with a minimum investment of US$500,000. To operate such a fund, at least one officer in the organization must be a CFA charterholder or, alternatively, the organization can employ someone who has passed the local investment certification program and has accrued five years of lead portfolio investment experience. Lee Kha Loon, CFA, head of the Centre’s Asia Pacific office, together with board members of CFA Indonesia, met with officials from Bapepam and the Indonesian Stock Exchange in April to promote the work of the Centre.

 

Recent media coverage and society activities highlight growing interest in Centre contributions in providing ethics training in Australian markets. Lee held a series of ethics training workshops in Australia in April with Frank Dohn, CFA. A members' training session was held with CFA Society of Melbourne followed by three events in Sydney. The CFA Society of Sydney hosted a session for members and another for Maple Brown and AMP Investors, their corporate sponsors.

 

The member society in Malaysia, in collaboration with Bursa Malaysia (the stock exchange), hosted a program on “Greed and Corporate Failure: The Lessons from Recent Disasters.” The speaker, Professor Stewart Hamilton — part of the CFA Institute Speaker Retainer Program — addressed 120 participants, including representatives of Bursa Malaysia, the Securities Commission, and CFA Institute members. Lee gave an opening address covering shareholder activism in Asia as well.

 

In April the CFA Institute Centre, together with the Indian Association for Investment Professionals (IAIP), submitted a comment letter to SEBI (PDF), the securities regulator in Mumbai, in response to their consultation paper “Proposed Policy for Improvement in Sales Practice by Members of the Stock Exchange.” It was an important step in building a relationship with Indian regulators and promoting the value of the CFA Institute Code of Ethics and Standards of Professional Conduct. We look forward to continuing such collaboration with the president and members of IAIP as they further the cause of increasing professionalism and ethical standards in the local markets.

 

Update from the EMEA Region
Charles Cronin, CFA, head of the Centre’s efforts in the Europe, Middle East, and Africa region continues to build relationships with societies, media, and the investment community in EMEA. Cronin and his staff advocate for best practices in the workings of the region’s capital markets through: consultation letters in response to proposed regulations; meetings with and presentations for industry organizations, regulators, and agencies; press outreach; and society collaboration.

 

Two recent consultation letters have addressed credit rating agencies (CRAs), and reiterated our view that CRAs should use a different nomenclature for structured products from that used with traditional bonds. Another letter, to Her Majesty’s Treasury (HMT) on market abuse, supported HMT’s proposal for a temporary continuation of the UK super-equivalent provisions because we believe the UK legislation is more likely to capture market abuse. Our letter (and a supplementary document) to the Financial Reporting Council (FRC) proposed amendments to their Combined Code of Corporate Governance. The Centre’s EMEA staff also collaborated with the CFA Society of the UK, in addressing the Financial Services Authority (FSA) on the same topic.

 

Along with Jim Allen, CFA, director of the Capital Markets Policy Group, Cronin had very positive meetings last month with the FSA’s market abuse team and with the UK society’s Asset Backed Securities interest group.

 

Both Cronin and Allen also participated with closing remarks at the co-hosted CFA Society of the UK and CFA Institute Centre Executive Compensation panel discussion 22 April in London. The event garnered media attention by Global Pensions, Financial News, and others.

 

Latest Comment Letters
Read the most recent comment letters from the CFA Institute Centre, including those to:

  • IOSCO (PDF) on their consultation report on credit rating agencies
  • HM Treasury (PDF) on Market Abuse Regime: A Review of the Sunset Clauses
  • The Financial Reporting Council (PDF) on probable weakness in “Section D”
  • XBRL US (PDF) on the updated US GAAP Taxonomy and Preparers Guide
  • The President's Working Group (PDF) on Financial Markets on Principles and Practices for the Hedge Fund Investors.

 

Visit the CFA Institute press room to view recent press releases and media coverage of CFA Institute Centre issues and events.

 

Did You Know?
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