Views on improving the integrity of global capital markets
29 June 2016

Code and Standards: Are You Living Up To Your Annual Pledge?

Posted In: Asset Manager Code
hand holding pen, writing

Are you living up to your annual pledge? That’s a question Murtaza Jafferjee, CFA, the advocacy chair of CFA Society Sri Lanka, asked members in a town hall meeting on 27 May. He posed the question to emphasize the importance of the pledge all members of CFA Institute make every year — to uphold (and when possible improve) ethical and professional conduct in financial markets globally.

Jafferjee also asked members for their thoughts on various controversial business practices, such as the following:

  • extending rebates on brokerage or management fees;
  • offering different levels of services without disclosing to all clients;
  • misusing benchmarks to compare performance;
  • revealing clients’ trading information;
  • misusing proxy voting rights;
  • engaging in insider trading or front running; and
  • allowing money managers to accept inducements in the form of commission rebates, placement fees, and profit sharing.

Asking these questions provided a segue for Jafferjee and members to discuss the principles embodied in the CFA Institute Code of Ethics and Standards of Professional Conduct and address the ethical aspects of those practices. For example, Standard II(A): Material Nonpublic Information speaks to insider trading; Standard III(B): Fair Dealing addresses not dealing with clients fairly and objectively; Standard III(D): Performance Presentation calls for fair, accurate, and complete investment performance information; and Standard III(E): Preservation of Confidentiality protects the confidentiality of clients, prospective clients, and former clients.

All members of CFA Institute sign the Professional Conduct Statement every year pledging to abide by the Code and Standards. The pledge to maintain high ethical standards and to conduct business ethically is crucial to gain the public’s trust in financial markets and in the investment profession. But we have to be aware of and cautious about possible influences, such as conformity, framing (responding to an incentive system), and overconfidence, that may lead ethical individuals to engage in unethical or illegal behavior.

During the town hall meeting, attendees also had a lively conversation about CFA Society Sri Lanka’s stand on ethical misconduct and its roles and responsibilities in Sri Lanka’s financial markets. Actionable ideas mentioned included:

  1. reporting unethical actions;
  2. engaging in vigorous advocacy efforts to affect regulations and standards;
  3. providing ethics training, such as our ethical decision-making online course and webinars, to members and candidates;
  4. increasing awareness of the long-lasting, negative consequences of any unethical or illegal activity;
  5. strengthening enforcement of any compliance or legal violations; and
  6. promoting the CFA Institute Asset Manager Code of Professional Conduct to build a culture of integrity within firms.

It is exciting to see the enthusiasm of CFA Society Sri Lanka for improving the integrity of financial markets. Its commitment to putting investors first, upholding the highest standards of ethics, and improving ethical business practices deserves our applause. I hope the enthusiasm spreads to all CFA societies and improves financial markets globally.

If you liked this post, consider subscribing to Market Integrity Insights.

Image Credit: ©

About the Author(s)
Irene Cheung, CFA, CAIA, FRM

Irene Cheung, CFA, CAIA, FRM, is a former director of Professional Standards for CFA Institute. Her responsibilities included promoting ethical and professional conduct standards in the Asia-Pacific region.

Leave a Reply

Your email address will not be published.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.