CFA Society Melbourne


OUR ADVOCACY FOCUS – Where We Stand on Key Policy Issues That Matter to the Profession

Systemic Risk


Issue: The global financial crisis highlighted the interconnected nature of the financial sector and revealed systemic risk as being a real and present threat to the entire system. While regulators around the world are dealing with some of the same issues to prevent a future crisis, they must find ways to work together to police the risky investment practices of large, interconnected firms that operate on a global scale.

CFA Institute Position: As co-sponsor (with Pew Charitable Trusts) of the Systemic Risk Council (SRC), CFA Institute is actively monitoring and encouraging regulatory reform of systemic risk detection and mitigation in U.S. capital markets, particularly in the areas of bank capital requirements, money market reform, and funding for financial regulators.
CFA Institute also participated in a G–20 task force charged with making recommendations to harmonize financial regulatory standards worldwide.


Over-the-Counter (OTC) Derivatives


Issue: In 2009, the G–20 sought to mitigate systemic risk and improve transparency through increased standardization, exchange trading, central clearing, and trade reporting of OTC derivatives. In the United States, the Dodd–Frank reform law gave the Securities and Exchange Commission and the Commodity Futures Trading Commission authority to oversee OTC derivatives, but the agencies and foreign regulators have not devised a solution for how derivatives trading will work internationally. Meanwhile, in Europe, the European Market Infrastructure Regulation (EMIR) will require central clearing of eligible derivatives, and proposals under the revised Markets in Financial Instruments Directive (MiFID) are to require exchange trading of sufficiently liquid instruments.

CFA Institute Position: To the extent possible, derivatives should be exchange traded and centrally cleared, with more transparency around reporting of trades. This position is consistent with the recommendations of the U.S. and European Investors’ Working Groups, both of which were convened by CFA Institute. We have since responded to regulators with comment letters addressing specific rule proposals.


Uniform Fiduciary Duty


Issue: The 2013 CFA Institute Global Market Sentiment Survey — which polled CFA Institute members on their outlook for world capital markets in the coming year — has revealed great concern among CFA Institute members about mis-selling of investment products. Although the U.S. Dodd–Frank Act gave the SEC authority to create a regulation that would impose a uniform fiduciary standard of care for retail investment advice — and a January 2011 SEC report recommended that the agency proceed with a rule — the SEC has not taken action. But the Commission recently took a significant step toward possible implementation of the recommendation with a public release seeking comment for a cost–benefit analysis on its fiduciary rule.

CFA Institute Position: CFA Institute has advocated a uniform fiduciary standard for those who offer personalized investment advice to retail investors. We have advocated for such a standard in several jurisdictions, including the U.S. and Canada.