Self-regulation preferable to legislation says CFA head

Members of New Zealand’s investment sector have received a global accolade for ethics and standards at the same time as Commerce Minister Margaret Wilson introduced a Bill to Parliament setting out tougher rules for the financial markets.

Tuesday, December 14th 2004, 6:24AM

The increasingly prestigious Chartered Financial Analyst (CFA) qualification was handed over to 92 of New Zealand’s analysts, who passed the third and final examination this year, by Dr Bob Johnson, executive vice-president of the CFA programme.

A total of 168 NZ candidates sat level one – three exams with 98 passing. That gave New Zealand the highest percentage pass rate among the 116 countries with the programme.

Johnson says the exams, which measure ethical and professional standards, securities analysis and valuation, financial statement analysis, quantitative methods, economics, corporate finance, portfolio management and performance measurements, are highly regarded throughout the world.

Johnson believes with measurements like the CFA in place, the financial sector should continue to be more self-regulated.

However, New Zealand’s move toward more regulation parallels the United States. “Regulation is very often crisis driven,” he says.

The Securities Legislation Bill Wilson introduced to Parliament on November 30 has tougher disclosure rules for advisers, broadens the definition of insiders, introduces criminal remedies for insider trading as well as civil penalties and has new market manipulation laws.

"We want to deter misconduct in our markets," Wilson said. "When investors see that we are serious about deterring, detecting and punishing this sort of behaviour, New Zealand becomes a more attractive investment destination."

Johnson agrees there are some circumstances where regulation is required to protect the investor and points to the proliferation of hedge funds globally.

He says the unregulated hedge funds sector operates on a different playing field than managed funds.

One consequence is that “bad actors” gravitate to the least regulated field. “It’s about the integrity of the financial markets,” Johnson says.

“Once people lose confidence (in those markets), it is detrimental for economic growth and development.”

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