The CFA Institute, which represents certified financial analysts globally, is establishing an advocacy centre in Hong Kong to cover the Asia-Pacific region, and is set to introduce new standards to the hedge fund industry, FinanceAsia has reported.
According to the Institute's New York-based managing director Kurt Schacht, the organisation, which is independent, is drawing up new guidelines as part of the wider response to recent corporate and investment scandals such as Enron.
The Institute is setting up advocacy centres in New York, Charlottesville in Virginia, London and Hong Kong. Lee Kha-Loon, formerly of PricewaterhouseCoopers, Standard Chartered Bank and the Malaysian Securities Commission, will head the Asia Pacific group from his base in Kuala Lumpur, Malaysia. The Institute is also on the lookout for candidates to serve as policy advisors in Hong Kong.
The CFA supports the United States' Securities and Exchange Commission's policy to require hedge funds to register as investment advisors from 2006. Even so, the organisation believes that hedge fund registration is unlikely to prevent fraud from taking place, and argues that an industry code of conduct and self-regulation would be more effective than tougher government-led regulation.
This code of conduct is based on five principles: better disclosure and valuation practices; improved disclosure by managers to ensure that they follow the fund's stated objectives; more measures to support best execution; the compulsory appointment by hedge funds of a compliance officer; and more transparent literature to advise investors of a fund's fee structure, performance and trade allocations.
The Institute plans to survey of all its members in Asia and Japan to ascertain the extent to which these practices are being followed.
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