INVESTMENT PROFESSIONALS HAVE LOST CONFIDENCE IN U.S. INVESTOR PROTECTIONS, FINDS CFA INSTITUTE SURVEY

Posted July 20, 2009

NEW YORK – Members of the CFA Institute, an association of investment professional, have less faith in the ability of current US investor protections to ensure an orderly functioning of the equity markets, according to the 2009 Financial Market Integrity Index report for the US. The report has been issued by the Institute’s Centre for Financial Market Integrity.

The open-ended comments that US respondents provided, in addition to survey rankings, overwhelmingly affirm that dissatisfaction with the country’s current regulatory model is the main area of concern.

The FMI gauges CFA charterholders’ perceptions of the state of ethics and integrity in six different markets around the world and how these perceptions change over time. The FMI measures the level of integrity – the ethics of market participants and the effectiveness of market systems in ensuring market integrity – that CFA charterholders experience in their respective markets, including Canada, Hong Kong, Japan, Switzerland, the UK and the US.

The FMI also reported that in the US, of all those rated in the category of financial professionals, ratings for corporate boards and corporate executives dropped the most between 2008 and 2009. The drop suggests that respondents perceive these particular types of professionals to be most responsible for the current financial crisis.

Based on their perception of market ethics and integrity alone, only 49 percent (versus 68 percent in 2008) of in-market respondents were likely or very likely to recommend investing in US markets. Those outside the US responded comparably, at 43 percent in 2009 versus 67 percent in 2008.

In 2009, those outside the US appear to have lost a significant amount of faith in US market systems. In the 2008 survey, those outside the US rated regulatory and investor protections higher than did those inside the US; this perspective reversed in the 2009 survey.

“It is very instructive to see how ethics ratings changed in the year of economic crisis,” says Kurt Schacht, Managing Director of the CFA Institute Centre. “While somewhat expected, it is troubling to see how significantly ethics factors have deteriorated overall as a reflection of trust and confidence in markets. Both practitioners and regulators need to take notice.”