Measuring Market Integrity: 2009 FMI Index Released

Earlier this year, the CFA Institute Centre surveyed CFA, FSIP, and ASIP designees in six major financial markets to gauge the perceptions that investment professionals hold about market integrity. As a follow-up to the 2008 surveys, respondents rated both the integrity of the market participants and the effectiveness of the systems in the markets in which they do business. The Financial Market Integrity (FMI) Index results for 2009 are now available. Each country-specific report — on Canada, Hong Kong, Japan, Switzerland, the United Kingdom, and the United States — details current survey results and year-to-year comparisons. Rather surprisingly, given the market shifts in the past year, not all of the news was horrible.

We invite all investors to read this year’s reports to better understand the unique challenges facing each market and encourage investors to follow this index in the future to ascertain whether any systematic issues develop that require the action of investment professionals, regulators, and CFA Institute. Find each report and further details about the FMI Index methodology on our website.

Updated Code Addresses Risk, Repels Madoff-Type Behavior

The financial market meltdown, among other things, brought to light the unethical activities of Madoff and other asset managers — activities that had been obscured by the darkness created when markets, regulators, and investors ignored or allowed unknown and undisclosed hedge fund practices.

Unethical asset managers took advantage of that darkness to prey on uninformed and unsuspecting investors, with ruinous consequences. In the wake of this devastation, CFA Institute has published the second edition of its Asset Manager Code of Professional Conduct with new provisions that strengthen its requirements relating to risk management. The new provisions require firms complying with the AMC to establish processes to identify, monitor, and analyze a spectrum of risks relevant to the firm and portfolios managed by the firm, and these processes must be disclosed to clients. Managers must also use a new compliance statement and notify CFA Institute of their claim of compliance. The re-launch is occurring just as the regulatory reform debate is heating up with a demand for greater transparency and emphasis on protecting client interests. Adopting the AMC, which sets forth ethical principles and practices that must be abided by in full, is clearly one way firms can assure investors that their behavior is ethical and that the firms’ policies are transparent.