The Association for Investment Management and Research (AIMR) is working on new guidelines to address analyst integrity.
Charlottesville, Va.-based AIMR confers the Chartered Financial Analyst (CFA) designation to its members, most of whom are analysts and money managers, although some retail reps obtain the title, too. In a July position paper, the association raised several issues and asked for comment.
And CFAs have been speaking up (see “Has AIMR Ducked the Conflict Issue?” right).
The conflict of interest between analysts and investment banking is the key issue. In some cases, bankers preapprove research reports, and some analysts' pay is linked directly to investment-banking deals, the AIMR paper says.
In June, the SIA issued guidelines suggesting research departments exercise more independence. But neither the SIA nor AIMR has suggested separating research from investment banking — the basic problem raised by many CFA commenters.
Maria Clark, an AIMR spokesperson, says the association won't go as far as recommending a separation. “But the conflicts have to be managed and disclosed,” she says.
Has AIMR Ducked the Conflict Issue?
CFAs have been giving AIMR an earful in comment letters regarding the association's July position paper. Some say the group is lax about enforcing its existing ethics code, which requires CFAs to be objective.
It could be that “many CFAs who work in investment banking already violate [AIMR's ethical standards] routinely,” warned John Vineyard, a CFA with Sunlake Investment Management in Ithaca, N.Y.
Another CFA, Roland Caldwell, of Caldwell Trust Co. in Venice, Fla., said the analyst profession has for decades “kept a blind eye to this black eye” of investment banking conflicts. “As I near my retirement years, it would be a wonderful present to me if … this lifelong concern is finally going to be seriously addressed by our own professional organization,” Caldwell said.
AIMR has posted comment letters at www.aimr.org/standards/issues/ai_comments.html.
— D.J.
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