A recent CFA Institute Financial Market Integrity Outlook Survey shows that CFA Institute members in 8 of the 16 largest markets see derivatives as the most serious issue facing global markets. While 23% of global respondents ranked derivatives as most serious, 20% consider financial reporting and market fraud as the most serious issue facing global markets.
Thirty-one percent of respondents said improved enforcement of existing laws and regulation is the most needed regulatory/industry action to help improve global market trust and integrity, while 23% said improved regulation and oversight of global systemic risk is the most pressing.
“We created the Financial Market Integrity Outlook Survey as a way for CFA Institute members to help us assess the ethical framework of our profession and to identify any ‘hot spots’ facing the industry,” said Kurt Schacht, CFA, managing director of the Standards and Financial Market Integrity division at CFA Institute.
“Sadly, only one-third of all respondents are optimistic that the integrity of capital markets will be better in 2011 than in 2010. A more optimistic view of financial market integrity will likely depend on increased global transparency of risk and risk-related instruments and better regulatory coordination of systemic risk detection and mitigation.”
Respondents in Japan, Russia, and India are the most optimistic about the integrity of capital markets in 2011 versus 2010, while Singapore, Hong Kong, and Germany have some of the highest proportions of members indicating the integrity of the markets will deteriorate.
CFA Institute members in South Africa, the United Kingdom, Japan, and the United States were the most likely to believe the effects of the credit crisis will last over five years. Those markets with the highest proportion of members believing the impact will last one to two years were India, China, France, and Singapore.
Respondents from nine of the 16 priority markets in this survey said the most serious issue facing their local market in the coming year is financial advisers’ mis-selling products to generate commissions. Six markets (China, Japan, Russia, India, Brazil, and the UK) indicated that market fraud is the most serious issue. CFA Institute members in France said market trading practices is the most serious local market issue.
Eight of the 16 priority markets said improved regulation and oversight of global systemic risk is the most needed, though globally (and in six priority markets) improved enforcement of existing laws and regulations is selected as the most needed regulatory action.