Aus investors fear pandemic will breed unethical conduct

The findings from CFA Institute are based on a survey on its members across the world, analysing the effects of the economic crisis on the global economy, capital markets, the investment industry and government and central bank responses. 

Around half (51 per cent) of Australian respondents reported it is likely the current crisis will result in unethical conduct in the investment management industry, compared to 45 per cent globally. 

Further, almost all of the Aussie investment managers (98 per cent) believed the regulator should move to educate the public about the risks of investor fraud while 81 per cent thought the regulator should focus on market surveillance. 

Most Australian participants also thought that regulation of the financial market should not be relaxed to promote liquidity across markets, compared to 50 per cent of global respondents. 

CFA Societies chief executive Lisa Carroll said opportunities to gain in volatile trading for finance and investment professionals will “undoubtedly present themselves”. 

“During times of crisis, all participants in the financial services industry need to ensure that they do not prioritise their personal financial interests ahead of those of the investing public or their companies or adopt illegal practices,” Ms Carroll said.

“This is something regulators will need to monitor closely as the pandemic leads to stressed market conditions, volatility and sharp changes in asset values.”

She added her group will have an important role to play in using its code of ethics and professional conduct guidelines to work with the industry on boosting standards.

“Investment professionals must live up to the level of standards expected of them as fiduciaries to clients and the wider public,” Ms Carroll said.

Globally, two-fifths of respondents reported the industry should be bracing itself for large-scale bankruptcies – with 39 per cent of respondents seeing it could be an outcome of the crisis.

Around the same number (38 per cent) forecast an acceleration of operations turning to automation to reduce costs. Further industry consolidation was also a theme, as well as divergence between emerging and developed markets and a potential reduction in the globalisation of financial markets. 

Looking at employment in the industry, almost half (44 per cent) of Australian respondents said they see no change in their firm’s hiring plans, while 45 per cent reported a hiring freeze. Only a tenth said their companies were downsizing.

The vast majority of local respondents (82 per cent) also believed that companies that receive emergency support during the crisis should not pay dividends or compensate executives with bonuses, compared to 75 per cent globally. 

The Australian slice also pushed against the idea of a ban on short-selling, with 85 per cent saying it should not be considered.