Views on improving the integrity of global capital markets
21 November 2011

Three Wise Monkeys: Lessons for the Investment Industry

Rummaging through my desk the other day, I found a set of little carved monkeys I’d picked up at a Hong Kong flea market years ago. They were the “see no evil, speak no evil, hear no evil” trio from folklore. I put them on my desk and have looked at them often this past week. They seem to mock me as I read the news these days. Penn State University given exemption from public access to records. High profile investors not required by the SEC to publicly disclose their holdings in companies. Members of the U.S. Congress not bound by U.S. insider trading laws. CEOs of investment banks not required to pass basic regulatory exams.

The three wise monkeys have been interpreted in the West to mean, “Look the other way … don’t ask.” When the special players in these news stories made their special pleadings for these exeThree Wise Monkeysmptions, each one of them probably made sense at the time, from their point of view. It just gets a little uncomfortable when these waivers get held up to public scrutiny in light of scandals, bankruptcies, and the yardstick of common sense.

The three figures from folklore also are a little like those in positions to grant special exemptions. Some of the onus of fixing the problem falls on them. Regulators and lawmakers need to show the public that equal treatment doesn’t only apply to the little guy. For example, how is market transparency furthered by granting selective exemption to disclose significant ownership positions? The SEC has said little, but among factors widely considered as important in granting the “Buffett-delay” seems to revolve around whether the target company is comfortable that the acquiring investor is non-activist in nature.

Doesn’t that invite more of the coziness that got us into this mess in the first place? To regulators: Consider ending these selective exemptions. Investors privileged enough to take strategic stakes should be able to handle having those stakes disclosed the same as other market players.

But these episodes remind us that the real gauntlet is thrown down before those who would seek special treatment. What’s the compulsion to get the rules changed “just for me?” These folks and these institutions are centers of power, money, and influence. No one should begrudge them of what they have earned. But we see this pattern of the privileged seeking to adjust the rules to suit their own interests when, in reality, they should be held to a higher standard.

In these confused, troubled days of “occupy” and its offshoots, we must insist on moving to higher standards of professionalism, transparency, and public interest. The recent news flow is not encouraging.

 

About the Author(s)
John Rogers, CFA

John Rogers, CFA, is the former president and CEO of CFA Institute.

3 thoughts on “Three Wise Monkeys: Lessons for the Investment Industry”

  1. sunil kumar singh says:

    Nicely explained! See no evil (eventhough violation of CFA ethics), speak no evil, hear no evil, but in present day to day life, we need one more monkey who says do not do evil…..

  2. Sudresh says:

    Instead of constantly parroting the media’s depiction of “all” Wall Street employees being unethical, I wish CFA Institute would emphasize the specific people who are committing the acts. In most cases, they are politically connected (this includes Warren Buffet and the Sokol insider trading fiasco, Coca-Cola accounting, FNMA, etc). Lets not mention the face sucking vampire squids or members of Congress.

    Instead of falsely lumping CFA members in with these villans, why doesn’t CFA Institute work to get its members into CEO positions? There, they could use the Ethics Code to reshape the industry for the better

  3. Ayushya Lihala says:

    Sir i agree with you that people who consider themselves to be leaders in business and Politics (CEO’S, Members of Congress and Strategic Investors) should be subject to even stricter scrutiny and regulations rather then be exempted from the same.

    On the other hand i donot think that any Institute can make its members become CEO’s. It is something that an indiviual has to achieve on his own and a society can just enable you with the tools to achieve that. In my opinion If we seek preferential position just because we belong to that society then we become the evil we seek to destroy.

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