2.1 How Professions Establish Trust Characteristics which increase the confidence and credibility in professionals and their organizations: Professions normalize practitioner behavior Pr
Trang 1Reading 6 Professionalism in Investment Management
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Professions maintain trust by establishing codes and
setting standards that put a framework around ethical
behavior and technical competence
Professions are defined as an occupational group with:
• specific education,
• expert knowledge, and
• a framework of practice and behavior that
underpins trust, respect, and recognition
Most professions emphasize:
• an ethical approach,
• the importance of good service, and
• empathy with the client
Driving forces of a new profession include governments
and regulators which encourage the formation of an
ethical relationship between professionals and society at
large
One difference between professions, on the one hand,
and craft guilds and trade bodies, on the other hand, is
that the former are required to uphold ethical standards
In addition, trade bodies do not have a mission to serve
society or set and enforce professional conduct rules for
practitioners
2.1 How Professions Establish Trust
Characteristics which increase the confidence and
credibility in professionals and their organizations:
Professions normalize practitioner behavior
Professionalism is underpinned by codes and standards
developed by professional bodies Regulators support
professional ethics and recognize the framework for
ethics provided by professionals Codes and standards
can be complementary to regulations
Governments support professions due to the role played
by professionals in helping the public
Professions provide a service to society
Professionals should go beyond codes and standards by
advocating for higher educational and educational
standards in the industry, individually and through their
companies
Professions can also widen access to services and support economic activity by encouraging trust in the industries they serve A profession that earns trust will have greater flexibility to manage their own affairs and will allow members of the profession develop service models to benefit the client community
Professions are client focused Professionals should:
• place the integrity of their profession and the interest of clients above their own personal interests,
• act in the best interests of the client, and
• exercise a reasonable level of care, skill and diligence
Fiduciary duty: the obligation to deliver a high standard
of care when acting for the benefit of another party
To enforce ethical awareness and improve the quality of client service, most employers encourage members to
be members of a relevant profession
Professions have high entry standards Membership of a profession is a signal that a professional will deliver high-quality service of a promised standard going beyond their academic credentials
Professionals possess a body of expert knowledge Knowledge, developed by experts of a profession, is made available to all members of a profession which helps them work effectively and ethically and is based
on best practice
Professions encourage and facilitate continuing education
Most professional bodies require that a specific amount
of new learning is undertaken each year to keep up to date with changes in technology, standards of ethical behavior, in services that can be offered, and the legal and business environment in which services are being rendered
Trang 2Continuous professional development: is the process by
which professionals undertake new learnings This
process may be segregated into different types
competencies and types of learning activity
Any training and education undertaken by professionals
will increase the value of human capital which
contributes to economic growth and social mobility
Professions monitor professional conduct
Members of a profession must be held accountable for
their conduct to maintain the integrity and reputation of
the industry This is achieved by monitoring and
imposition of sanctions on members
Professions are collegial
Professionals should respect the rights, dignity, and
autonomy of others
Professions are recognized overseeing bodies
Many professions are not-for-profit organizations with a
mission which emphasizes excellence, integrity, and
public service An overseeing body typically ensures that
professionals strive to remain competent
Professions encourage the engagement of members Professionals should mentor and inspire those who have
or are willing to enter into a profession Professionals should be willing to volunteer to advance the profession engaging with peers to develop expertise and ethics Professionals should also volunteer to educate new generations in ethical knowledge and ethical decision making
2.2 Professions Are Evolving Professions are evolving due to:
• greater transparency and public accountability is forcing professions to change and
• technology opening up possibilities for new ways of working
Key processes of a profession’s responsibilities need to be reviewed by a professional agency or independent public body
Effective professions continue to develop their role to account for changing best practices
3 Professionalism In Investment Management
Public understanding of the investment profession’s
codes and practices is still developing Recognition by
employers and regulators lags established professions
Currently, the investment management profession meets
most, but not all, of the expectations of a professional:
• Globally, there is a trend to require examined
entry to practice investment management
and maintain competence but few
professions practice all expected attributes
The investment management profession has become
increasingly globalized due to the opening up of capital
markets Regulatory coordination across borders and
emergence of technology are contributing to this
globalization
3.1 Trust in Investment Management
Investment professionals are trusted to maintain a
standard of knowledge and apply that knowledge with
care and judgement Investment professionals are also
expected to have:
• superior financial expertise;
• technical knowledge; and
• knowledge of applicable laws and regulations
Professionals should also seek to disclose risks, conflicts, and any fees involved to clients in a way to serve their best interests
Compliance with of ethics and standards of professional conduct is essential for investment professionals and practice should be guided with care, transparency, and integrity
To maintain trust, investment management firms and the investment profession must be interdependent
Regulations and standards set by professional bodies may differ from and conflict with those of employers and regulators
The investment management profession can deliver more value to society when higher levels of trust combined with better capital allocation lower transaction costs and help meet client objectives
Trang 33.2 CFA Institute as an Investment Management
Professional Body
In addition to US public company standards, the CFA
Institute Board of Governors has resolved to implement
US not-for-profit leading practices
Mission of CFA Institute: “to lead the investment
profession globally, by promoting the highest standards
of ethics, education, and professional excellence for the
ultimate benefit of society.”
CFA Institute candidates and members must meet the
highest standards established by CFA Institute, regulators
or employers When client and market interests conflicts,
the Institute requires the duty to market integrity should
be the overriding obligation
The CFA Institute collects knowledge from practicing
investment professionals, conducts rigorous
examinations, and ensures practitioner involvement in
developing codes and ethics
Practice analysis: is the process of continuous interaction
with investment management professionals to ensure
that their body of knowledge remains current and
globally relevant
The CFA Institute ensures that candidates have mastered the core knowledge, skills, and abilities that are
necessary and applied by investment professionals The Institute also participates in new research and its dissemination as well as generation of financial ideas Through local societies, CFA Institute encourages members to interact in local professional communities and engages them in its initiatives Membership in a local society is important for continuing professional
development
CFA Institute additionally requires members and candidates to:
• adhere to Code and Standards;
• annually sign a statement attesting to that continued adherence; and
• maintain and improve their own professional competence as well as those of others
4 Expectations of Investment Management Professionals
The characteristics and behavior expected of all
professionals include:
• honesty,
• integrity,
• altruism,
• continuous improvement,
• excellence,
• loyalty, and
• respect for colleagues, employers, and
clients
Extremely high standards, including behavior in public,
but not perfection, is expected of individuals
Professionals are additionally expected to:
• uphold the reputation of their profession
• be responsible, reliable and accountable in
their work
• engage in continuing professional
development to update their knowledge
• provide independent advice
• avoid or disclose conflicts of interest
• respect client information, objectivity and
transparency
Some attributes which are shared by most professions include the duty to be honest, open in dealings and obtain informed consent from clients Professionals should not abuse their specialized level of knowledge the possess compared to their clients
Professionals should disassociate themselves from violations of laws or regulations Individuals are encouraged to act up themselves in response to a concern even if they are unable to alter the conduct of others
When encountering ethical dilemmas, investment management professionals should carefully consider the facts of each issue and assess the implications for clients, their employers, and their own career
Investment professionals should be able to understand and apply judgment relating to the code and standards
of their professional bodies to their loyalty to their employer The CFA Program ethics and professional standards guide investment professionals in the case of conflicting interests
Professionals may raise a concern with the following:
• colleagues or contemporaries
• supervisors
• a firm’s compliance or ethics officer
• a mentor outside the firm
Trang 4• a professional body hotline
• senior individuals in the firm
• a firm’s whistleblowing line
• a regular or law enforcement agency
Professionals should seek to raise an ethical dilemma issue internally as a starting point In seeking the advice
of others, professionals should seek confidentiality Protecting the client may take priority over an individual raising concern
5 Challenges for Investment Management Professionals
Investment management faces challenges from:
• consumerism (most influential social force
today),
• regulation,
• globalization,
• demographics, and
• technological innovation
Regulation has helped raise professional standards by
making them a requirement for practice
Globalization has allowed for common investment
practices resulting in harmonization of investment
practices and regulation
Challenges of globalization:
• Large firms consolidate in developing their
own standards and codes which conflict with
those of individual professional bodies
• Standards of market integrity and client
interest may vary in the countries and regions
in which a firm operates
Rapid advancements in technology is the biggest
challenge faced by the investment management
profession Examples of the effects of technology on the
investment management profession:
• Rapid advances in computer power alter the
definition professional expertise and how it is
applied to serve investors
• Digital systems may replace or enhance
investment professional’s functions
• Important functions of the investment
profession such as index replication and risk
management are being automated
• Artificial intelligence (AI) developments
Technological developments demand that the
investment profession evolves through continued
education programs In addition, new codes of practice
and standards should be developed which recognize
the growing intersection between human and artificial
skill