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News July 11, 2005 Issue

Update from the CFA Institute

Hereís the latest on a variety of projects from the Charlottesville, VA-based CFA Institute:

Transition to GIPS. Whereís that early summer guidance we expected on the transition from AIMR-PPS to GIPS standards? According to Alecia Licata, director of investment performance standards at the CFA Instituteís Centre for Financial Market Integrity, the group has several guidance documents underway. They should be released this month or next, she said.

Wrap fees. Licata said that the group will be putting out something on the Wrap Fee/SMA Guidance Statement "within the next few weeks."

Code of ethics. The CFA Institute recently issued the revised version of its Code of Ethics and Standards of Professional Conduct. Thatís the code designed for individual CFA holders ó advisory firms should look to the groupís Asset Manager Code of Professional Conduct.

Compliance with the new two-page CFA code is mandatory for all CFA holders and CFA candidates. The code will become effective January 1, 2006

Substantively, there arenít too many changes: the new code is a reorganized and streamlined version of the old code. A few items of note: if you are a CFA, you are now automatically subject to a gift policy. Under the code, CFA holders "must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or anotherís independence and objectivity." This policy previously was set out in the groupís Standards of Practice Handbook, but referred to "monetary compensation or other benefits," not "gifts."

CFA holders are no longer required to make a one-time notification to their employers that they are required to comply with the CFA code ó itís now just a recommendation. (If that old requirement was news to you, youíre in excellent company. Apparently, many CFA holders had not been aware of that requirement).

The CFA Institute backed down from broadly prohibiting any conduct reflecting on the memberís honesty, trustworthiness, or professional competence. The code now more narrowly prohibits conduct that reflects negatively on the CFA holderís professional reputation, integrity or competence. The group said it had received comments that "a broad standard that appears to regulate personal behavior inappropriately overreaches by injecting CFA Institute into a member or candidateís private life."

Performance measurement. The CFA Institute has launched a new certification program for professionals responsible for investment performance analysis and reporting under GIPS. The program, titled "Certificate in Global Investment Performance Standards," or "CGIPS" for short, will be open to all individuals regardless of their status as CFA holders, including regulators and consultants. Candidates need not be sponsored by their employer.

The program, which is slated to begin in the first half of 2006, will include a web-based distance learning element and two examinations (one on the basics, one more advanced).The program will require two years of practical experience in a performance-related position and a continuing education requirement (60 hours every three years; CFA holders will be able to count their CFA professional development hours towards the CGIPS program, provided the subject matter qualifies). Certificate holders will be entitled to use the CGIPS designation, as in "John Smith, CGIPS."

The cost of the program has not yet been set. "You can be assured that the program will be fairly priced," said Philip Lawton, director of the CGIPS program. "It will reflect the value of the designation and the cost of delivery."

For more on the CGIPS program, check out a webcast of Lawtonís presentation at the CFA Instituteís annual conference held May 2005, posted on the CFA Instituteís website.