CFAs give Canada’s financial services passing grade

When it comes to ethics in financial services, Canada is slightly above “adequate,” according to the CFA Institute. On a scale of 1 (poor) to 5 (excellent), Canada received a rating of 3.64 in the institute’s inaugural Financial Market Integrity Index.

Canada’s score was derived from a global survey of 800 Chartered Financial Analysts (CFAs). Matt Orsagh, senior policy analyst for the CFA Institute Centre for Financial Market Integrity — the think-tank arm of the CFA Institute — says the Canadian score was acquired from 120 respondents who either lived in Canada or did a significant amount of business in the Canadian market.

While the study was global, and corresponding rankings were released for the U.S. and U.K. earlier this year, Orsagh says that the Institute purposely avoided comparing Canada’s results to the responses of other nations individually. Instead, the ranking was set against the CFA Institute’s own code of ethics and standards, and the only cross-border comparisons were between members who resided in Canada and those who resided abroad.

Survey participants showed the most confidence in the transparency of the Canadian markets, with an average rating of 3.37, and the least confidence in corporate governance, with an average rating of 3.18.

Orsagh says that if only the opinions of CFAs working in Canada are considered, regulation was the largest reported gripe. Clearly unhappy with Canada’s fragmented provincial regulatory system, survey respondents in Canada ranked it below adequate.

“Those in Canada showed the most distrust for regulators because of the number of regulators. Most of the comments in the Canadian report were directed towards this,” Orsagh says.

As for individual professions within the investment industry, Canadian money managers got a thumbs-up for their integrity. Money managers were viewed as the most trustworthy, with an average rating of 3.56. At the opposite end of the scale, private equity and hedge fund professionals were not considered trustworthy. They earned the lowest rating, averaging a “below adequate” ranking of 2.72.

Interestingly, Orsagh points out, not everyone holds money managers in high regard. CFAs who are money managers themselves generally had a much lower opinion of their profession’s integrity than respondents in general.

Orsagh also says that distrust of hedge fund professionals is not Canada-centric, that both domestic and international CFAs had a virtually identical low regard for their integrity.

The CFA Institute Centre for Financial Market Integrity plans to conduct the FMI survey annually, Orsagh says, so that it can document trends in the industry. It also intends to expand the index to several other markets in the months ahead, reflecting the growth of the global membership of the CFA profession worldwide.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com