Views on improving the integrity of global capital markets
05 April 2011

All Regulation Is Local

Posted In: Uncategorized

The late former U.S. Speaker of the House Tip O’Neill coined the popular slogan “all politics is local” to emphasize that a politician’s success is tied to the ability to understand and address the issues most important to their constituents.

Regulators around the world might want to take heed of Tip’s wise advice because the same principle applies to financial markets, as in “all regulation is local.”

This year’s CFA Institute Financial Market Integrity Outlook Survey (PDF) emphasizes this dictum well. While the global issue that most concerned CFA Institute members was derivatives, the local issue that caused greatest concern in most markets was mis-selling by financial advisers.

Indeed, respondents from nine of the 16 largest markets in this survey said the most serious issue facing their local market in the coming year is financial advisers’ mis-selling of products to generate commissions.

For those who might ask, mis-selling is defined as follows:

A financial professional or salesperson misleading an investor about a product or service. This can often occur due to incentive structures that emphasize selling and commissions over service to the investor.

These results are of little surprise to those who have followed the CFA Institute Financial Market Integrity Outlook Survey in past years. Starting with the first survey in 2007, and in each year since, CFA Institute members have highlighted mis-selling as a concern in a number of markets, including Canada, Hong Kong, Germany, and the United Kingdom.

And since that time, we have seen little legislation or prosecution related to this issue. What is your local regulator doing to ensure that advisers act in the best interest of their clients?

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

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