cfa magazine march-april

AIMRs Member Magazine forInvestment Professionals

March/April 2004

M A G A Z I N E

A creative spin on risk management

Measuring volatility in an uncertain world

Modern day derivatives

PLUSPutting risk measurement in context, the rewards of managing intangible risk, and explaining risk to private clients

Defying the throes of financial risk takes sheer grit, unwavering skill, and a little bit of luck

Risky BUSINEBUSINESSSSRRiskisky y BUSINESS

AIMRs Member Magazine for Investment Professionals

March/April 2004

M A G A Z I N E

COVER STORY

24 Risky BUSINESS

The story of risk management past, present, and future.BY CHRISTOPHER WRIGHT

32 ThinkingOutside the BoxA creative spin on risk management.BY SUSAN TRAMMELL, CFA

36 Weighty MattersRobert Engle on measuring volatility in an uncertain world.BY CHRISTINA GROTHEER

40 Modern Day DerivativesA new twist on an ancient concept.BY JOHN RUBINO

50 Private Client CornerExplaining risk to private clients.BY ED MCCARTHY

52 Ethics ForumCan regulatory reform changeWall Street?BY STEPHEN BROWN, CFA

54 Standards in PracticeShareholder engagement grows in the UK.BY MARK HARRISON, CFA

Professional PRACTICE

44 Portfolio PerformancePutting risk measurement in context.BY CYNTHIA HARRINGTON, CFA

46 Analyst AgendaThe rewards of managing intangible risk.BY JONATHAN BARNES

48 Trading TacticsQFII rules open Chinese markets to institutional investors.BY NANCY OPIELA

COLUMNS

3 In FocusA new name to solve an old problem.BY TED ARONSON, CFA

5 ViewpointRisk: The whole versus the parts.BY PETER BERNSTEIN

56 Point-CounterpointShould derivative strategies be used by investment managers only to lower risk exposures?BY JOHN MARSLAND, CFA, AND JOT YAU, PHD, CFA

DEPARTMENTS

In Summary

2 Nothing ventured, nothing gained.

Letters

4 Readers express their views.

Education Calendar

6 Upcoming AIMR and society events.

Briefs

8 AIMR, member, and society news.

Global Standards

14 AIMR expands GIPS standards to private equity.

16 IPC seeks comment on updated GIPS standards.

Advocacy

Asia-Pacific

17 Australia set to legislate new auditorrules, corporate disclosure.

Europe

18 Europe remains divided on adoptionof accounting standards.

United States

20 NYSE at center of controversy and restructuring.

Canada

22 Wise Persons Committee supportscreation of national regulator.

Nothing Ventured, Nothing GainedAnd the day came when the risk to remain tight in a bud wasmore painful than the risk it took to blossom.

Anais Nin

Given that risk is a fundamental part of investing, the bestthat we can do is to take calculated risks. Such thinking hasgiven rise to what is commonly known as risk management.

For a primer on the subject, be sure to read Risky Busi-ness (p. 24). This article traces the evolution of the field and

recounts the lessons to be learned from cat-aclysmic events such as the collapse ofLong-Term Capital Management.

While the fear of such fat tail eventscan make even the most confident investorweak in the knees, there is no shortage ofexperts in this area to lend critical insights.

One such expert is Peter Bernstein,who shares his personal belief that victoryin the long run accrues to the humble

rather than to the bold in his perspective piece, Risk: TheWhole Versus the Parts (p. 5).

Another expert is Robert Engle, whose Nobel prize-win-ning ARCH model is helping practitioners more accuratelypredict volatility, as told in Weighty Matters (p. 36).

Such models are undoubtedly an essential part of a prac-titioners tool kit. However, the import of human discernmentcannot be overemphasized, particularly when it comes to riskmanagement.

This message comes through loud and clear in ThinkingOutside the Box (p. 32), which profiles three firms offeringoutsourced risk management services, each with its own cre-ative spin on coupling theory with practice.

Similarly, Modern Day Derivatives (p. 40) tells of theancient roots of these popular and controversial risk-reduction instruments, and explores the myriad ways thatthey are being applied by innovative investors today.

Finally, our Professional Practice section features a num-ber of other articles related to risk management, includingPutting Risk Measurement in Context (p. 44), Risk Man-agement and Valuation (p. 46), and Risk Management forPrivate Clients (p. 50).

The only thing thats really certain is that this is a profes-sion fraught with risks. And how you respond tight in abud or in full bloom is up to you.

DERIK [email protected]

AIMR PRESIDENT & CEOTom Bowman, [email protected]

EDITORDerik [email protected]

CONTRIBUTING EDITORChristina [email protected]

COPY EDITORRobin [email protected]

EDITORIAL ASSOCIATELori [email protected]

CFA Magazine (ISSN 1543-1398, CPM 400314-55) is published bimonthly in January, March, May, July, September, and November by the Associationfor Investment Management and Research (AIMR). Periodicals postage paid at Charlottesville, VA, and additional mailing offices. POSTMASTER:Send address changes to CFA Magazine, PO Box 3668, Charlottesville, VA22903-0668.

Statements of fact and opinion are the responsibility of the authorsalone and do not imply an endorsement by AIMR.

Copyright 2004 by AIMR. All rights reserved. Materials may not bereproduced or translated without written permission. CFA, CharteredFinancial Analyst, and the AIMR logo are just a few of the trademarks ownedby AIMR. See www.aimr.org for a complete list.

Annual subscription rate for AIMR members is US$10, which is includ-ed in the membership dues. Annual nonmember subscription rate is US$75.

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AIMRs Member Magazine forInvestment Professionals

March/April 2004

COVER PHOTOGRAPHYGetty Images 2004

EDITORIAL ADVISORY TEAMShanta AcharyaBashir Ahmed, CFAJim Allen, CFAJonathan Boersma, CFAJohn Cabell, CFAJarrod Castle, CFAMichael Chan, CFAMichael Cheung, CFAJosephine Chu, CFAFranki Chung, CFADarrin DeCosta, CFANick Dinkha, CFAJerry Donohue, CFAAlison Durkin, CFAKenneth Eisen, CFAWilliam Espey, CFAJulie Hammond, CFAJody Hansen, CFAM. Mahboob Hossain, CFAVahan Janjigian, CFAAndreas Kohler, CFA

Aaron Lai, CFAKate LanderAlecia LicataCasey Lim, CFAMichael Liu, CFABob Luck, CFAMark Mak, CFATrevor Mak, CFADennis McLeavey, CFARoger MitchellSudip MukherjeeJerry Pinto, CFALinda RittenhouseChristina Haemmerli Schlegel, CFADavid Shen, CFALarry Swartz, CFAJacky Tsang, CFAGary Turkel, CFARaymond Wai Pong Yuen, CFAJames Wesley Ware, CFAJean Wills

VOL.

15,

NO

. 2

M A G A Z I N E

C F A M A G A Z I N E / M A R C H - A P R I L 2 0 0 42

IN SUMMARY

CFA Institute New Name to Solve an Old ProblemBY TED ARONSON, CFA

nyone who has ever gone through the process of selecting a name for a child should be able to appreciate the discussion our organization hasgone through over the past several months. Even with just two peopleinvolved with the selection of a childs name a mother and a father

the process still usually goes on for months. And then the family gets into theaction: your parents suggest one name, your sister has a better idea, and your greataunt has promised the child her inheritance, but only if the child is a girl andshares the aunts name!

Well, folks, were in the last trimester here and its time that we settle on a sin-gle name. Fortunately, we have arrived at a single name: CFA Institute. It was neverin doubt that we would include the letters CFA in the new name, which was ourstarting point. Discussion since then has centered around how we should qualifyCFA. Some thought the qualifier should be international, as in CFA Interna-tional. Others thought it should be institute, as in CFA Institute. Now, with thewhole family behind us members, societies, the Board, and the professional staff its time to name this child and put him/her to bed:

CFA InstituteSetting a higher standard for investment professionals worldwide

Let me take you back, for a moment, to 1990 when AIMR was formed. It wasthen that AIMR governor Charley Ellis, CFA, wrote in a letter to then CEO PeteMorley, CFA, that he thought AIMR was a good name. A good name, he said,until we could come up with a better one.

For the subsequent 14 years we have listened to members say that the nameAIMR was inadequate. It wasnt descriptive of the membership. It didnt leverageour greatest asset, the CFA designation. And, more recently, our public awarenesscampaign has shown us that promoting two brands AIMR and CFA is confus-ing to outside audiences and ultimately leads to confusion among the very peoplewhose perceptions our communications programs attempt to shape.

Member perception is crystal clear on this issue: you want wider recognition of the CFA designation, identifying this as one of your top three priorities for theorganization. And more than 75 percent of you want the letters CFA in the orga-nizational name. Thats what we get with CFA Institute, which meets all the require-ments we set out to fulfill when we began this discussion last July: its memorable; itsdistinctive and instantly recognizable; it is directly linked to the CFA designation.

If I needed additional reassurance that changing our name to align with the CFAbrand was the right thing to do which I didnt I was convinced by the afore-mentioned public awareness studies, which showed that when investors are present-ed with two brands AIMR and CFA their recall of either is severely hampered.

Even if I had been a supporter of keeping the name AIMR which I have notbeen I would have been convinced to change my mind when more than 75 per-cent of members said they would vote in favor of a name change that incorporatesthe letters CFA.

And if I preferred another name over CFA Institute, which, in fact, I did Ioriginally favored CFA International my preference has changed. I am willing toput aside my initial favorite if that is what must be done for the name change to beapproved by members.

The comparison going forward should not be to any name other than AIMR.Its CFA Institute versus AIMR. I will vote for CFA Institute, and I hope you will as well.

C F A M A G A Z I N E / M A R C H - A P R I L 2 0 0 4 3

In Focus

A

More than 75 percent of you want the

letters CFA in the organizational name.

Thats what we get with CFA Institute

TED ARONSON, CFAAIMR Chair

Agree However

I agree completely with the concept of a name change [forAIMR]. We operate a small firm near Mobile Alabama wherethere is no awareness of the distinction between the CFAcharter and any other string of letters behind someones name.However, after reviewing names for similar national organiza-tions, it seems that CFA International does not meet the mark.I recommend International Institute of Chartered FinancialAnalysts, which has a more professional sound to it.

Mark Davidson, CFADaphne, Ala., USA

Disagree But

I disagree with Tom Bowmans support of changing AIMRsname to CFA International. The conclusion for promotingthe name change is not supported by the premise. The prem-ise, as stated by Tom and AIMR, is the need to raise awarenessand wider recognition of the CFA designation. The recom-mendation of changing the AIMR name to CFA Internationaldoes nothing of the sort. It actually leverages I would evensuggest hijacks the CFA designation and its brand powerto promote the association. AIMR has taken great stepsover its history to protect the use of the designation, includ-ing limiting the use of the designation only in appropriate


formats, as well as limiting its use as a noun. Given this, itshard to imagine that the association would consider using theCFA designation as the only noun in its proposed new name.If a name change has to occur, I would suggest the historicaland more appropriate Institute of Chartered Financial Ana-lysts (ICFA).

Dimitri Triantafyllides, CFACharlotte, NC, USA

AIMRS RESPONSEThank you to both Mr. Davidson and Mr. Triantafyllides on theirletters regarding the proposed name change. Though the nameCFA International did have strong support of the membership,the name CFA Institute had similar support and was the over-whelming preference of AIMR societies. Though the Institute ofChartered Financial Analysts one of AIMRs predecessororganizations might have been a favorite, use of the termChartered Financial Analysts is a violation of the trademarkprotection in place for the CFA designation and thus was a non-starter for our discussions.

Please see the message from AIMR Chair Ted Aronson, CFA,on page 3 and the article on page 9 for more information on theBoards decision to bring the name CFA Institute to a vote as areplacement for AIMR.

LETTERS

[Advertisement]


Viewpoint

BY PETER BERNSTEIN

any years ago, in the middle of a staff meeting, acolleague passed me a scrap of paper on whichhe had written, When all is said and done,more things are said than done. When I con-

sider the plethora of books, articles, consultants, and confer-ences on risk in todays world, my friends aphorism hasnever seemed more appropriate. Are we never going to nailrisk down and bring it under control? How much more cananyone reveal to us beyond what we have already been told?

In a very real sense, this flood of material about risk isinherently risky. Sorting out the pieces and searching formain themes has become an escalating challenge. The root ofthe matter gets lost in the shuffle while we are analyzing allthe elegant advances in risk measurement and the impressivebroadening of the kinds of risks we seek to manage. More issaid than is done, or what is done loses touch with what hasbeen said.

If we go back to first principles for a moment, perhapswe can put the multifarious individual pieces into some kindof a larger framework and optimize the choices among themasses of information we are attempting to master.

Professor Elroy Dimson of the London Business Schoolonce said risk means more things can happen than will hap-pen. Dimsons formulation is only a fancy way of saying thatwe do not know what is going to happen good or bad.Even the range of possible outcomes remains indeterminate,much as we would like to nail it down. Remember always:Risk is not about uncertainty but about the unknown, theinescapable darkness of the future.

If more things can happen than will happen, and if weare denied precise knowledge of the range of possible out-comes, some decisions we make are going to be wrong. Howmany, how often, how seriously? We have no way of know-ing even that. Even the most elegant model, as Leibnizreminded Jacob Bernouilli in 1703, is going to work onlyfor the most part. What lurks in that smaller part is hiddenfrom us, but it could turn into a load of dynamite.

The beginning of wisdom in life is in accepting theinevitability of being wrong on occasion. Or, to turn thatphrase around, the greatest risks we take are those where weare certain of the outcome as masses of people are at clas-sic market bottoms and tops. My investment philosophy hasalways been that victory in the long run accrues to the hum-ble rather than to the bold.

This emphasis on ignorance is the necessary first steptoward the larger framework we need if we hope to sort outthe flood of information about risk that assails us. Now wecan break down the problem of risk into what appear to meto be its three primary constituent parts.

First, what is the balance between the consequences ofbeing wrong and the probability of being wrong? Many mis-takes do not matter. Other mistakes can be fatal. No matterhow small the probability you will be hit by a car when youcross against the lights, the consequences of being hitdeserve the greater weight in the decision. This line of ques-tioning is the beginning, and in some ways the end, of riskmanagement: All decisions must pass through this sieve. It isthe end if you decide not to take the risk, but it is also theend in the sense that distinguishing between consequencesand probabilities is what risk management is all about.

Second, expect the unexpected. That sounds like anempty clich, but it has profoundmeaning for risk management. It iseasy to prepare for the risks youknow earnings fail to meet expec-tations, clients depart, bonds gosour, a valued associate goes to acompetitor. Insurance and hedgingstrategies cover other kinds of riskslying in wait out there, from pricevolatility to premature death.

But preparation for the unex-pected is a matter of the decision-making structure, and nothing else.

Who is in charge here? That is the critical question in anyorganization. And if it is just you there when the unexpectedstrikes, then you should prepare in advance for where youwill turn for help when matters seem to be running out ofcontrol.

Finally, note that word control. With an exit strategy when decisions are easily reversible control over out-comes can be a secondary matter. But with decisions such aslaunching a new product or getting married, the costs ofreversibility are so high that you should not enter into themunless you have some control over the outcome if thingsturn out differently from what you expect. Gambling is funbecause your bet is irreversible and you have no control overthe outcome. But real life is not a gambling casino.

These three elements are what risky decisions are allabout consequences versus probabilities, preparation fordealing with unexpected outcomes, and the distinctionbetween reversibility and control. These are where things getdone, not said.

Peter Bernstein is the founder and president of Peter L. Bern-stein, Inc., which he established in 1973 as economic consultantsto institutional investors and corporations around the world.

Peter Bernstein

Risk: The Whole Versus the Parts

M

5


5 April Speaker: William Nemerever, CFABOSTON SOCI E TY

7 April Resurgence of Interest inPrivate Equity: Quo Vadis PD CREDITS: 7

BOSTON SOCI E TY

8 April Co. Presentation: Staples Inc.BOSTON SOCI E TY

13 April Sustainable Success forYour Investment Management Firm PD CREDITS: 8.5

PH I L ADE LPH IA, PA. , U SA

14 April Investing in the REITIndustry PD CREDITS: 1

N EW YO RK SOCI E TY

15 April Reversal of Fortune: Housing and the EconomyPH I L ADE LPH IA SOCI E TY

15 April International Trust andEstate Applications PD CREDITS: 3


22 April Co. Presentation: Bank ofAmericaBOSTON SOCI E TY

29 April Effective Communicationand Presentation SkillsPD CREDITS: 6

BOSTON SOCI E TY

29 April Wealth Management Conference PD CREDITS: 6


SOUTHEASTERN US

16 March Co. Presentation: LexmarkLOU I SVI LLE SOCI E TY

WESTERN CANADA

22 April Evolution of the PrivateEquity MarketC A LG A RY SOCI E TY

19 May Global Population Devel-opments and Implicationsfor InvestmentsC A LG A RY SOCI E TY

NORTHEASTERN US

15 March Enhancing Phone SkillsBOSTON SOCI E TY

15 March Regulatory Reform and the Road AheadN EW YO RK SOCI E TY

16 March Benchmarking CorporateGovernance in Portfolio AnalysisHA RTFO R D SOCI E TY

16 March The New World of PensionFund Management PD CREDITS: 8

BOSTON, M A S S. , U SA

18 March Speaker: Dr. Lee ThomasBOSTON SOCI E TY

18 March Broad-Based EmployeeStock Compensation Conference PD CREDITS: 7


25 March Regulation of HedgeFundsBOSTON SOCI E TY

29 March Behavior of InstitutionalInvestorsBOSTON SOCI E TY

30 March The State of the US ConsumerHA RTFO R D SOCI E TY

1 April Selecting and EvaluatingOutside ManagersN EW YO RK SOCI E TY

ASIA-PACIFIC

27 March Derivatives PD CREDITS: 2.5

HONG KONG SOCI E TY

24 April Internet and MediaPD CREDITS: 2.5

HONG KONG SOCI E TY

22 May Asset Management Industries in ChinaPD CREDITS: 2.5

HONG KONG SOCI E TY

EUROPE, MIDDLE EAST, & AFRICA

29 April Speaker: Dr. Edgar Loew PD CREDITS: 1.5

G E RM A NY SOCI E TY

26 May Speaker: Dr. Joerg WulfkenG E RM A NY SOCI E TY

EASTERN CANADA

17 March Impact of OptionsAccounting on EPSPD CREDITS: 2

MONTR E A L SOCI E TY

24 March Technical Analysis PD CREDITS: 1


31 March Co. Presentation: Deutsche TelekomMONTR E A L SOCI E TY

12 May Asset-Backed SecuritiesPD CREDITS: 1


26 May The Failing Wall StreetModel PD CREDITS: 1


10 June Forecast DinnerMONTR E A L SOCI E TY

CENTRAL CANADA

20 April Evolution of the PrivateEquity MarketSA S K ATCH EWA N SOCI E TY

EDUCATION CALENDAR


17 March Speaker: Peter BrooksR ICH MON D SOCI E TY

24 March Speaker: David GladstoneWA S H I NGTON SOCI E TY

6 April Speaker: Chuck Hill, CFAR ICH MON D SOCI E TY

6 April Speaker: Chuck Hill, CFAWA S H I NGTON SOCI E TY

8 April Speaker: Frederick CobleR ICH MON D SOCI E TY

13 April Speaker: Marty Fridson, CFAN APLE S SOCI E TY

21 April Speaker: Dr. William FordN A S HVI LLE SOCI E TY

21-22 April Accounting Tomfooleryand Financial StatementAnalysisNO RTH C A ROLI N A SOCI E TY

22 April Speaker: Dan Fuss, CFAWA S H I NGTON SOCI E TY

5 May Speaker: Bob SteersWA S H I NGTON SOCI E TY

11 May Co. Presentation: WCI CommunitiesN APLE S SOCI E TY

19 May Speaker: Fred HassanWA S H I NGTON SOCI E TY

MIDWESTERN US

18 March Speaker: Jeff Diermeier, CFAST. LOU I S SOCI E TY

24 March Speaker: James DeanWE ST M ICH IG A N CHAPT E R

25 March Speaker: David DremanCH IC AGO SOCI E TY

15 April Speaker: Ben BernankeCH IC AGO SOCI E TY

AIMR CONFERENCE: For details, visitwww.aimr.org/conferences. Or, to register by phone, call 800-247-8132 or 434-951-5500.

SOCIETY EVENT: For details, visitwww.aimr.org/socservices/socindex.asp,or e-mail [email protected].

PD CREDITS: Event qualifies for thedesignated number of credit hours in AIMRs Professional Development Program.

29 April Speaker: Marty Fridson, CFAST. LOU I S SOCI E TY

6 May Speaker: MichaelMauboussinCH IC AGO SOCI E TY

20 May Speaker: Alan Lacy, CFACH IC AGO SOCI E TY

26 May Speaker: Richard BernsteinCH IC AGO SOCI E TY

8 June Speaker: Richard HokensonWESTERN MICHIGAN CHAPTER

9 June Speaker: Richard HokensonDE TROIT SOCI E TY

SOUTH CENTRAL US

24 March Speaker: Don LuskinDA LL A S SOCI E TY

8 April Interest Rate DerivativesDA LL A S SOCI E TY

15 April Speaker: Paul StevensDA LL A S SOCI E TY

WESTERN US

16 March Leadership and Culture in Investment Firms PD CREDITS: 1.5

SA N F RA NCI SCO SOCI E TY

17 March Speaker: Steve Leuthold PD CREDITS: 1

TU CSON CHAPT E R

18 March Rebalancing Theory andPracticePO RTL A N D SOCI E TY

18 March Speaker: Phil Fortuna PD CREDITS: 1.5


23 March Volatility as a Source of ReturnsLOS A NG E LE S SOCI E TY

23 March Speaker: Thomas Berghage PD CREDITS: 1.5


24 March Forecast DinnerS E ATTLE SOCI E TY

25 March Using Markets to ForecastMarketsPHOE N IX SOCI E TY

13 April Speaker: Mark Tibergien PD CREDITS: 1.5


22 April Investment Presentationsfor Financial ProfessionalsPO RTL A N D SOCI E TY

5 May Speaker: Liz Anne Sonders PD CREDITS: 1.5


9 May Research for the Practitioner III PD CREDITS: 4

DE NVE R, COLO. , U SA

9-12 May AIMR Annual Conference PD CREDITS: 14

DE NVE R, COLO. , U SA

EDUCATION CALENDAR

If your region or society is not listedhere, please ask your program chair tosubmit your societys educational pro-grams to [email protected] for inclusionin the next issue.


AIMR Member ResignsEffective 24 January 2004, Gary L. Pilgrimof Pennsylvania, USA, resigned his CFAcharter and AIMR membership in thecourse of an AIMR Professional ConductProgram inquiry.

In MemoriamJames Fletcher, CFA, a longtime society leader and volunteer, died on 24 December2003 at his home in Altadena, Calif., USA. He was 63.

Fletcher was senior vice president of investments for Smith Barney, where he spe-cialized in institutional relationships. He began his career at Hornblower & Weeks and

had worked at Smith Barney or its predecessor organizationsfor many years.

During his tenure at Smith Barney, Fletcher enrolled inthe CFA Program and was awarded his charter in 1987. Hewas elected to the Board of Governors of the Los Angeles Soci-ety of Financial Analysts (LA Society) in 1989, and held a hostof society positions before becoming president in 1994-1995.

Always a strong believer in the value of education,Fletcher expanded the LA Societys educational offerings sub-stantially during his tenure as president. One of Jims mostinteresting program innovations was a luncheon during whichthe management of two or three smaller capitalization compa-

nies presented, says Frank Dohn, CFA, former LA Society president and AIMR Gover-nor. These presentations were among the most successful of their time.

In addition, he created and taught for many years the Foundations of Investmentscourse, which generated consistent revenue for the LA Society and provided increasedvisibility in the broader business community. Fletcher also created the LA Societysannual CFA charter recognition event and two awards the Emerging Leader Awardand the Most Valuable Committee Member Award, which are annually presented by theLA Society Board of Governors. Recently, the LA Society voted to re-name the EmergingLeader Award in his memory and honor.

A tireless supporter of the CFA Program, Fletcher worked constantly to advance theprogram within Smith Barney, and volunteered as a CFA exam grader from 1994 to 1998.

He is survived by his wife, Laura, and two sisters.

New CFA Advertising Campaign Goes Live

CFA Spells Trust. That is the theme of the

next generation of the CFA adver-tising campaign, which went liveto audiences across the globalinvestment community in Febru-ary. Television ads target high-net-worth investors in North America, depicting two situationswhere people can benefit from seeking professional advice. Inone television spot, a diner relies on the advice of a sommelier toselect the ideal wine to complement a fine-dining experience. In asecond television ad, a struggling golfer finds his best gameonly after making use of the expertise available to him from theclub professional. In both instances, a narrator makes the com-parison to investing and the importance of looking for the CFAdesignation in the selection of an investment adviser.

Radio and print advertisements pull from the same creativestrategies, which were tested with audiences of high-net-worthinvestors and investment professionals prior to their production.The radio ads will run primarily in North America while print adswill run in markets around the world.

The Research Foundation of AIMRencourages education for invest-ment practitioners worldwide andfunds, publishes, and distributes rel-evant research. Visit the ResearchFoundation website at www.aimr.org/research/index.html to learn moreabout the Foundation and its prod-ucts, to submit research topics youwould like to see addressed, to readabout the currently funded researchprojects or the 11 September Memo-rial Scholarship Fund, or to make adonation in support of current andfuture relevant research. You caneven apply for research funding ofyour own under the Proposal Sub-mission Guidelines section.

AIMROn the Web

Aronson Interviewed on Canadian TelevisionAfter a December meeting with officials at the Ontario Secu-rities Commission, AIMR Chair Ted Aronson, CFA, spokeabout the need to include investment professionals par-ticularly CFA charterholders on corporate boards duringan interview on Canadas ROB-TV. Who better to guide acorporation than professional investors? asked Aronson,who suggested the investment expertise and ethicalgrounding of CFA charterholders uniquely positions them torepresent investors interests on corporate boards. Aronsonalso took the opportunity to speak out on recent allega-tions of abuse by mutual funds, saying that if investmentprofessionals would pay attention to [AIMRs] rules,requirements, and ethical standards, the markets would bebetter [off ] with higher standards of integrity.

The television interview is available for viewing in thePress Room of the AIMR website.

AIMRBRIEFS


AIMRBRIEFS

Notice of Disciplinary ActionOn 6 November 2003, AIMR imposedthe sanction of Prohibition from Par-ticipation in the CFA Program uponGlenn H. Downen, pursuant to aStipulation and Offer of Consent forDisciplinary Action.

AIMR found that Downen violat-ed the AIMR Code of Ethics andStandards of Professional Conduct,Standard II(B) Professional Mis-conduct and Standard IV(B.6) Pro-hibition against Misrepresentation.

Downen enrolled to take the2002 Level II CFA examination.Although he was enrolled for the2002 exam, Downen failed to takethe exam he was a no show.Although he did not take the Level IIexam, Downen created a document,purportedly from AIMR, that repre-sented he passed the 2002 Level IICFA exam. He presented this docu-ment to his supervisor and also ver-bally represented to his supervisorthat he passed the Level II CFA exam.Downen received a compensationincrease for passing Level II of theexam. Downens employer subse-quently investigated the matter andhis employment was terminated.

Downen has consented to thissanction and the publication of thisnotice.

In a January 2004 survey of AIMRmembers, more than 75 percent ofrespondents said they would vote infavor of changing the organizationsname from AIMR to a name that incor-porates the letters CFA. At a 6 Febru-ary 2004 meeting,the AIMR Board ofGovernors unani-mously selectedCFA Institute asthe name they willbring to membersfor a vote at the 9May 2004 annualmeeting in Denver,Colo., USA.

With 75 per-cent of memberssaying the organi-zations nameshould be changed,you give members what they want,says AIMR President and CEO TomBowman, CFA. At issue here is whatsbest for the CFA charter, whats best for the organization, and whats best forindividual members. It is clear fromwhat members have told us and fromwhat weve learned in studying this

issue over the years, that a new name CFA Institute would be a positivestep in aligning the organization withour primary brand.

In the survey of members, supportwas about equal for two names: CFA

Institute and CFAInternational,which was theoriginal recommen-dation of a brand-ing consultant thatwas commissionedto lead the study.At the Board meet-ing, the scales ulti-mately tipped infavor of CFA Insti-tute because of itsstrong supportfrom society lead-ers and because

Board members felt it was more repre-sentative of the organization.

Adopting the name CFA Institutewill have many benefits, according toBowman, but none more importantthan focusing more attention on theCFA brand. Members repeatedly tellus they want more recognition of the

Members Overwhelmingly Support Name Change

At issue here is whatsbest for the CFA charter,

whats best for the organization, and whats best for

individual members.

TOM BOWMAN, CFAAIMR President and CEO

CFA designation among employers,among private investors, and amongthe general public, says Bowman. We have a multi-million-dollar publicawareness campaign in place. Thatmoney is far better invested in promot-ing a single brand CFA to theinvestment community.

Should members vote in favor of the name change, the organizationplans to launch its re-branding cam-paign on 1 September 2004.

Gravel Nominated to Chair AIMR Board of GovernorsMonique Gravel, CFA, of CIBC World Markets in Montreal, Quebec, Canada hasbeen nominated to chair the AIMR Board of Governors for the 2005 fiscal year,which begins 1 September 2004. Members will select a chair, a vice chair, and five

additional governors at the AIMR annual meeting to beheld 9 May 2004 in Denver, Colo., USA. John Stannard,CFA, of the Frank Russell Company in London, UK, hasbeen nominated to serve as vice chair. Gravel and Stan-nard will be joined on the 2004 proxy by four new nomi-nees who would serve three-year terms if elected: JoseLuis Velasco, CFA; Brian Singer, CFA; Margaret Franklin,CFA; and Sam Jones, CFA. Current governor VincentDuhamel, CFA, has been re-nominated for a secondthree-year term on the Board as has Gravel, whose first

term will expire 1 September 2004. Biographical information and voting procedureswill be contained in AIMRs 2004 proxy, which is scheduled to mail to all votingmembers in mid March.

Gravel Stannard


AIMRBRIEFS

BY SUSAN WEINER, CFA

s investment professionals develop their careers,they must consider industry trends and learn newskills. Industry executives, career consultants, andrecruiters sounded these themes at AIMRs inaugu-

ral Investing in Yourself event, co-hosted by the Boston SecurityAnalysts Society, on 21 January 2004, in Boston, Mass., USA.Here are some highlights of the gathering, which attracted acapacity crowd of 425 participants.

Slower Growth Impacts Careers

Although investment managements projected growth rate of8 percent for the next decade compares favorably with otherindustries, it is a significant drop from the 16 percent growthof the past decade, according to Mark Mandel, CFA, directorof global industry research at Wellington Management Com-pany in Boston, Mass., USA.

Accordingly, slower growth isalready making hiring more volatile.Mandel believes that job specialties willcontinue to go in and out of favor, justas demand for growth stock managersrose and fell with their funds perform-ance. As in other mature industries,Specialization will be a mantra, saysMandel. People will gain an edge byknowing a lot about a little, [especiallyin research]. For example, Mandel sug-gests that specialties could become asnarrow as Brazilian corporate bonds.

For investment professionals in the United States, thegreatest growth opportunities are predicted to be overseas.Consequently, having global skills, such as speaking foreignlanguages or knowledge of foreign accounting, taxation, andregulation, will help. Mandel recommends that research jobcandidates analyze a non-US company to illustrate their skills.

With capital market returns estimated to run in the sin-gle digits for the next five to 10 years, Mandel believes thatleaner organizations will depend more heavily on employeeteamwork, creativity, and resourcefulness. Also, according toRobert Gorog, a partner at Heidrick & Struggles in Boston,Mass., USA, slower growth is widening the compensation gapbetween the best-paid employees and the rest of the company.

Current Job Outlook

According to both Gorog and Kim Raynor, executive director,Russell Reynolds Associates in Boston, Mass., USA, hiring isrebounding, although slowly and selectively. Raynor says thatmisconduct in the mutual fund industry has opened doors tohiring experienced senior executives for leadership roles.

Whats more, fund firms are considering additions in riskmanagement, controls, and compliance. As for institutionalfirms, theyre making offers in sales, marketing, and, to a less-er extent, client relationship management in preparation forraising assets. For these roles, a Rolodex, product-specificexperience, and a high level of credentials [such as the CFAdesignation] are required, says Raynor.

From Gorogs perspective, Most hiring is focused onstrategic upgrading of key roles, [with an emphasis] on get-ting the manufacturing side of the house in order. For exam-ple, portfolio management team lift-outs are increasing forthose with strong track records.

Ongoing Professional Development Key

Career development doesnt stop once an applicant lands ajob. The skills required for success change with new roles.There are two S-curves in the development of an investment

management leader, according to TerryBacon, PhD, founder, CEO, and presi-dent of the Lore International Institute inDurango, Colo., USA the lower andupper S-curves.

For an analyst, the best way to haveimpact is to have the right answers,[whereas performance is key for portfoliomanagers], says Bacon. And, generallyspeaking, quantitative, analytical, com-munication, and decision-making skillscount more than softer skills, accordingto Bacon.

In the move from team leader tochief investment officer, leadership of people or of an organi-zation comes to the fore because delighted clients arepower. Says Bacon, [Regardless of where leaders work],they take people to places they would not have gone by them-selves and inspire people to outperform their capabilities.

Shifting from the first S-curve to the second can betough. It often requires leaving behind what attracted you to the profession in the first place, says Bacon. People whoare drawn to investment management are often not extrovert-ed types.

Bacon concluded with recommendations for developingleadership skills through self-study, leadership education,mentoring, peer interactions, and coaching.

For further information on specific presentations, visitthe Boston Security Analysts Societys Career Center atwww.bsas.org/careers/career_center.asp.

Susan Weiner, CFA, is a former director of investment communi-cations for an investment management firm in Boston, Mass., USA.

Investing in Yourself Event Offers Career-Savvy Advice

Misconduct in themutual fund industryhas opened doors tohiring experienced

senior executives forleadership roles.

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MEMBERSOn the Move

The PNC Financial Services Group Inc.in Pittsburgh, Pa., USA, announced thatJames Allen, CFA, has been elected aschairman and chief executive officer ofHilliard Lyons, Louis-ville, Ky., USA. Current-ly president of the firm,Allen has served theorganization for 23 yearsin various leadershippositions. Most recently,he has been the directorof Hilliard Lyons AssetManagement, a trustdivision of PNC Bank NA, and an affili-ate of JJB Hilliard, WL Lyons Inc.

Spectrum Control Inc., a leadingdesigner and manufacturer of electroniccontrol products and systems based inFairview, Pa., USA, announced inNovember 2003 the appointment ofPaul Bates, CFA, to its board of direc-tors. Bates currently serves as a portfo-lio manager for the Erie InsuranceGroup in Erie, Pa., USA.

Debra Fiakas, CFA, recently found-ed Crystal Equity Research, a New York,NY, USA-based research resource onsmall capitalization stocks. Fiakas willbe providing research coverage of small-er companies, mostly in the communica-tions, networking, and electronics sec-tors. Previously, Fiakas was a researchanalyst and investment banker specializ-ing in the micro- and small-cap sector.

Blaylock-Abacus Asset Manage-ment Inc. in New York, NY, USA awomen- and minority-owned moneymanagement firm specializing in fixed-income assets welcomes DeborahGeorge as managing director of mar-

keting and client serv-ice. George brings morethan 20 years of invest-ment industry experi-ence. Most recently, shewas vice president anddirector of marketingand client service atPhilippe Investment

Allen

George

AIMRBRIEFS

Management Inc., also in New York.In December 2003, Bed Bath &

Beyond Inc. in Union, NJ, USA,announced the election of JordanHeller, CFA, to the companys board ofdirectors, expanding the board to 10members. Heller is a managing directorat American Economic Planning GroupInc. in Watchung, NJ, USA, where hefocuses on comprehensive financial andestate planning for individuals andbusinesses.

In January 2004, Jenkintown, Pa.,USA-based Pitcairn Trust announcedthat Sandon Herzlich,CFA, has joined thecompany as vice presi-dent, wealth manage-ment sales. Herzlich willbe responsible for advo-cating and facilitatingnew client relationshipsfor investment manage-ment, trust and estateservices, and financial planning. Priorto joining Pitcairn Trust, Herzlichserved as manager of business develop-ment for the asset management servicesarea within The Vanguard Group inMalvern, Pa., USA.

New York, NY, USA-based Forbesannounced the promotion of VahanJanjigian, CFA, to vice president and

executive director ofForbes Investors Adviso-ry Institute (FIAI). Janjigian has been withForbes since 1997 asdirector of FIAI, wherehe also serves as editorof the Forbes GrowthInvestor and the ForbesSpecial Situation Survey.

Janjigian also serves on AIMRs USAdvocacy Committee.

George Klar, CFA, recently joinedLegg Mason Canada Inc. in Toronto,Ontario, Canada, as vice president ofinstitutional client service and market-ing. Klar has been actively involved in

Herzlich

Janjigian

the Canadian investment managementindustry for more than 20 years as aportfolio manager,investment consultant,and, most recently, aspartner at Beutel, Good-man & Company, alsoin Toronto.

Patrick Mars, CFA,has been appointed as amember of the board ofdirectors of EndeavourMining Capital Corp. based in GeorgeTown, Grand Cayman, BWI. Mars iscurrently an independent consultantspecializing in mine financing andanalysis. Formerly, he has held seniorexecutive positions with several Cana-dian investment firms, and he hasserved as a governor of the TorontoStock Exchange and as a director of theInvestment Dealers Association ofCanada.

Janaya Moscony, CFA, foundedSEC Compliance Consulting Inc. (SEC3)in Honolulu, Hawaii, USA, in 2003 andrecently moved theheadquarters toPhiladelphia, Pa., USA.Prior to founding SEC3,Moscony served as vicepresident for the AssetManagement Group ofthe Bank of Hawaii, alsoin Honolulu.

Zo Van Schyndel,CFA, recently became the businessdevelopment and risk management offi-cer for the King StarFish Hedge Fundin Miami, Fla., USA. Managed by KingStarFish Capital Mgt. LLC, it is theonly hedge fund in the United Statesthat donates a specific percentage of itsprofits directly to charity. Formerly, VanSchyndel had her own consulting firm,StarFish Financial Consulting, inBoston, Mass., USA.

Please send information regarding arecent promotion, job change, or profes-sional award to [email protected].

Klar

Moscony

In December 2003, the Stamford Society ofInvestment Analysts (SSIA) hosted a dinner torecognize new CFA charterholders. Each newcharterholder received a certificate of congratu-lations from SSIA and a copy of the GreenwichTime newspaper advertisement honoring them.Sixty members and spouses attended the party,held at a club decorated for the holidays.


One of AIMRs newest societies, the Society ofFinancial Analysts-Mauritius, held its annualgeneral meeting in October 2003. Board andregular members Hamalen Sunassee (far left);Jayesh Mehta; Sanjay Jagatsingh, CFA; Bala Cun-dasawmy; and James Leung, CFA, enjoyed dinnerat First Restaurant in Port Louis, Mauritius, fol-lowing the meeting.

The Board of the Argentina & Uruguay Chapter of Investment Professionalswelcomed Presidents Council Representative Dan Meader, CFA (standing,third from left), to its December 2003 CFA charter award ceremony inBuenos Aires, Argentina, where Federico Sturzenegger, director of TorcuatoDi Tella Universitys Business School, was the keynote speaker.

Fifteen new charterholders were recognized at the Society of Investment Analysts in Irelands charteraward ceremony at the National College of Ireland in Dublin. Bob Luck, CFA, AIMR vice president ofmember and candidate outreach (third from right), awarded the charters.

The Vancouver Society of Financial Analysts wel-comed 100 members and guests to its first char-ter award ceremony in December 2003. BillKovalchuk, CFA, AIMR Canadian PresidentsCouncil Representative (right), presented Dr.David Wu, CFA, with his charter. Dr. Wu semi-retired from 28 years in dentistry and foundedthe Biowest Biotech Hedge Fund one year ago.

The Investment Analyst Society of Chicago heldits annual dinner in October 2003 at the FourSeasons Hotel in Chicago. Lawyer, teacher, actor,comic, economist, father, novelist, essayist, andexpert on finance Ben Stein (sitting, second fromthe left) spoke to the 550 attendees about AReturn to Traditional Values and A BullishForecast for the Economy in the Coming Months.

The Edmonton Society of Financial Analysts heldits 26th annual forecast dinner in January 2004.More than 300 people attended the dinner, inpart to listen to speakers Peter Gibson (secondfrom left), Lloyd Atkinson (not pictured), andJoshua Feinman (second from right).

SocietyBRIEFS

Sixty-six investment professionals were awarded the CFA charter during theFrench Society of Investment Professionals fourth charter award ceremonyin December 2003. Bob Johnson, CFA, AIMR executive vice president, CFAProgram Division, was the keynote speaker.

The Luxembourg Chapter of Investment Professionals hosted its first char-ter award ceremony where 16 people received their charter in October2003. The event was held in the Panoramic Room atop the LuxembourgHilton. Approximately 40 people attended the ceremony, including guestspeaker Daniel Broby, Presidents Council Representative for Europe, Africa,and the Middle East (right).

SocietyBRIEFS

The Japan Society of Investment Professionalsheld its second annual charity Christmas partyin Tokyo in December 2003. Above, RobertMaxon, CFA (left), acting as Santa, presents raf-fle winner Christopher Grune, CFA, with a prize.

In October 2003, the Turkey Chapter held its launch event at the IstanbulStock Exchange (ISE). Approximately 100 top-level financial professionalsand academics attended, including AIMR President and CEO Tom Bowman,CFA (third from right), and ISE Chairman and CEO Osman Birsen (third fromleft). Media coverage of the event included four television stations, fournewspapers, and two news channels (including Reuters). CNBC conductedan interview with Bowman and Murat Kayahanli, CFA (second from left).


In November 2003, the German Association of Investment Professionals(GAIP) held its annual meeting, board member elections, and fourth annualCFA charterholder award dinner at the Maritim Hotel in Frankfurt, Germany.Newly and re-elected board members (above) welcomed the more than 80new CFA charterholders at the dinner where new GAIP President AndreasSauer, CFA (second from left), presented the charters. AIMR Vice Presidentof Candidate and Member Outreach Bob Luck, CFA, was the keynote speaker.

The Korean Society of Investment Professionalshosted a CFA charter award ceremony and annu-al members meeting in late November 2003.Nearly 90 members were present, including 68new CFA charterholders.

The Houston Society of Financial Analysts, inconjunction with the Dallas Society of FinancialAnalysts, held a post-exam party for candidatessitting for the December Level I examination.Candidates relaxed after the exam at the Hilton ofthe Americas in downtown Houston, Texas, USA.


BY CRYSTAL DETAMORE-RODMAN

hen AIMRs VentureCapital and PrivateEquity Subcommittee setout four years ago to

address incongruities in the way privateequity managers calculate and reportperformance, members were confrontedwith not only differing regulatory atti-tudes but also an asset class that wasdifficult to valuate.

One of the biggest headaches ofall is how to value a company that isnot yet making profits, says CarolKennedy, chair of the subcommittee andsenior partner at Pantheon VenturesLimited in the UK. All of the compa-nies in the early stages of developmentin the venture industry, for sometimes anumber of years, are not yet profitable.

The subcommittee ultimatelyendorsed the fair value reportingmethod over the historically popularcost-based approach. Not only doesGAAP require managers and investorsto record private equity investments atfair value, but most private equityindustry associations have sanctionedthe practice in their valuation guide-lines as well.

The fair value basis of valuationis a focal point of AIMRs newly adopt-ed GIPS Private Equity Valuation Prin-ciples, which extend to the privateequity sector global standards for theethical presentation of investment per-formance. Input data, calculationmethodology, composite construction,disclosure, and presentation and report-ing are all addressed in the AIMR prin-ciples. The GIPS private equity provi-sions which focus on fundraising take effect 1 January 2005, thoughfirms are urged to adopt them sooner.

Key disclosures include therequirements that firms document valu-ation practices, disclose that the proce-dures are available upon request, and

have the actual valuations reviewed byan independent entity. From a report-ing standpoint, the GIPS private equityprovisions require the inclusion of bothnet and gross of fees performance sta-tistics, as well as key multiples to helpprospective investors gauge the overallhealth of the fund.

Our standards create a checklistof types of information prospectiveinvestors should ask private equitymanagers for, AIMR Investment Per-formance Standards Associate GregoryTurk, CFA, states.

It was inevitable that greater scruti-ny would follow the venture capitalindustrys dramatic collapse in the early2000s. Significant growth in privateequity assets was another reason to putvaluation and performance reportingpractices under the microscope. In themid 90s, for your typical pension fund,private equity was 2 to 3 percent of the fund, and now its 5 to 8 percent,Turk explains.

Unfortunately, the industrys growthdidnt yield more meaningful valuationguidelines in all parts of the world. InNorth America specifically, publishedguidelines have been available for overa decade, but unfortunately these guide-lines were never fully endorsed. Cur-rently, an attempt is being made by aUS-based venture capital industry asso-ciation called PEIGG (Private EquityIndustry Guidelines Group) to not onlycreate valuation guidelines for the USbut also to have them fully endorsed bythe venture capital community.

The British Venture Capital Associa-tion was the first regional group to devel-op standards, followed by the EuropeanVenture Capital Association some yearslater. For well over a decade, both ofthose groupings have had developedguidelines, and the rest of the Euro-peans have followed as the industry hasdeveloped, Kennedy observes. Andbecause the industry around the world

has developed separately, each countryhas its own guidelines.

Although the GIPS private equitystandards are meant to wrap aroundregional industry association valuationguidelines, our standards are higherlevel principles that should be thoughtof as core principles that any privateequity firm should follow, says Turk.We dont get into the very detail that aprivate equity industry association getsinto in regard to valuation hierarchies.

Rick Hayes, senior investment offi-cer at the California Public EmployeesRetirement System (CalPERS), wel-comes the heightened focus on improv-ing reporting and valuation standards.We have been working with all thegroups focused on these issues, such as AIMR and the Institutional LimitedPartners Association, to move theseissues forward, he says. In running alarge portfolio, these types of issues arecritical so that we can make apples-to-apples comparisons of the performanceof our investments; at CalPERS, wemanage over 350 private equity invest-ments in the alternative investmentmanagement program. This is a step in the right direction.

Crystal Detamore-Rodman is a freelancejournalist with a background in smallbusiness finance.

GlobalSTANDARDS

Bridging the GapAIMR expands GIPS standards to private equity

WGlobal Investment Performance Standards (GIPS), www.aimr.org

British Venture Capital Association(BVCA), www.bvca.co.uk

European Venture Capital Associationwww.evca.com/html/home.asp

Private Equity Industry Guidelines Group (PEIGG)www.peigg.org/pages/1/

Dartmouth Collegehttp://mba.tuck.dartmouth.edu/pecenter/resources/glossary.html

HELPFUL LINKS

[ADVERTISEMENT]


GlobalSTANDARDS

BY CHRISTINE MARTIN

he AIMR Board and theInvestment PerformanceCouncil (IPC) just releasedthe latest version of the Glob-

al Investment Performance Standards(GIPS) for a six-month public com-ment period ending August 2004.Called the gold GIPS standards, theproposed version will raise the bar forfirms claiming GIPS compliance andeliminate the need for separate localstandards in many countries.

The GIPS standards are no longersimply a minimum worldwide stan-dard, says AIMR Vice President AleciaLicata. With the proposed changes, theGIPS standards now encompass muchof what the global industry deems to bebest practices in terms of performancepresentation and measurement.

The proposed version will certainlyimpact local versions of the GIPS stan-dards, such as AIMR-PPS standards, as these versions must incorporate allinterpretations and changes to the GIPSstandards. As a result, Licata fears thatsome constituents may miss out on theopportunity to give feedback.

Although most AIMR membersknow GIPS standards exist, many donthave a perspective on the relationshipbetween GIPS standards and their localversion, and therefore they may glossover their role in the standard-settingprocess to provide feedback andconsequently, the IPCs invitation tocomment, Licata says.

Yet Licata maintains that the publiccommentary process is vital to the suc-cess of GIPS standards. The IPC hasbroad representation geographically andtechnically, but it is only so large.Encouraging the public to think aboutthe practicality and applicability of IPCproposals adds significant value to theprocess, says Licata.

If we only hear the negative com-ments, it leaves us wondering whetherthe majority of the industry agrees with

the proposal or whether they just dontknow about it, says Licata. All com-ments received are posted to the AIMRwebsite for others to view.

The proposed updated version ofGIPS standards includes new, modified,and deleted provisions for which theIPC requests comments. Provisionsanticipated to draw the most feedbackinclude a new provision requiring man-datory verification as of 2010, a newprovision requiring firms to provide acompliant presentation to all prospec-tive clients, and a provision that clarifiesthat firms must provide a list anddescription of composites to any pro-spective client that makes such a request.

Notable modified provisionsinclude postponing the requirement foraccrual accounting of dividends and therequirement for carve outs to be man-aged with their own cash from 2005 to2010. Licata points out that the deci-sion to push back the effective dates forthese requirements is a direct result ofindustry feedback. The IPC takes pub-lic comment very seriously, and forthese two provisions although theyare important and represent best prac-tices it made sense to give the indus-try more time to implement theserequirements, she explains.

The proposed version also nolonger permits two of the three currentoptions for how a firm chooses to defineitself for purposes of complying withthe Standards (based on legal entity orbase currency). These deletions arebased on the idea that a firm should bedefined by how an entity is actually pre-senting itself to the public. Its a minorchange in the sense that it will notaffect most firms ability to claim com-pliance. But it is a major change in thatit captures the essence of what the GIPSstandards are all about, says Licata.

These changes illustrate the greateffort made to make the gold GIPSstandards and process as transparent aspossible. Particular attention was givento the structure of the document so that

despite changes intended to improvethe Standards, such as the addition of aglossary and a section on fundamentalconcepts, the proposed version looksvery similar to the current GIPS stan-dards. Even numbering was kept con-sistent with the current version.

One of the concentrations over thepast five years with the development ofthe gold GIPS standards was addingcomparability and transparency to non-standard, mostly private asset classes,such as private equity and real estate.The updated version also incorporatesprovisions for other technical areas,such as fees and advertising, whichalready have been released for publiccomment and finalized by the IPC andAIMR Board.

Following the public commentperiod, the IPC anticipates adoption ofthe gold GIPS standards early in 2005with an effective date of 1 January2006. The IPCs goal is to have updatedcountry versions and translations alsoadopted by 1 January 2006 so that allfirms complying with the GIPS stan-dards, or a version or translation, incor-porate the changes by the same date.

Some of the country versions willlose all their differences once the modi-fications are adopted. For those coun-tries, the question will be whether thereis a need for the country version tohave a brand name different fromGIPS, says Licata. In the spirit of con-vergence and transparency, the IPC andthe sponsors of each country versionare considering the implications of aname change for each market.

While the gold GIPS standardsrepresent a triumphant milestone, Lica-ta is quick to remind that the evolutiondoesnt stop with its adoption. TheGIPS standards are dynamic, says Lica-ta, adding that guidance for leverageand derivatives will be up for publiccomment in the near future.

Christine Martin is a freelance journalistwho writes for a variety of publications.

Going for Gold: IPC Seeks Comment on Updated GIPS Standards

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BY LORI PIZZANI

bill, originally drafted inOctober 2003 by the Com-monwealths Treasury office,then amended and intro-

duced into Australias ParliamentaryHouse of Representatives this pastDecember, is on its way to becominglaw beginning 1 July 2004. The bill, ifadopted by the legislature, will beef upauditor oversight and independencestandards as well as require companiesto enhance the disclosure of relevantinformation to the market.

The Audit Reform and CorporateDisclosure Bill 2003 was adapted fromthe latest initiative in the governmentsCorporate Law Economic Reform Pro-gram (CLERP), which seeks to improveregulation over accounting standardsand auditors and increase corporatedisclosure among publicly traded com-panies. The provisions of the bill areexpected to be debated in early March,with legislation finalized in April or May.

The Australian government origi-nally took up the cause in June 2002 in the wake of similar reforms beingconsidered by legislative leaders in theUnited States. Those US initiatives wereformally enacted in July 2002 in theSarbanes-Oxley Act. But while the USsystem is admittedly more rules-basedand prescriptive, the Australian govern-ment chose to continue its tradition ofrelying on a less restrictive, principles-based approach.

Australias accounting professionhas historically functioned within aself-regulatory environment. But overthe last few years, in light of global cor-porate scandals, a more regulated envi-ronment has taken hold.

While there is general support forthe new provisions, not everyone isenthralled with the proposed mandates.We had some concerns initially. Wedidnt want to see a situation where

that tier lie many smaller companies,many of which are actually smallerthan private entities, Palmer explains.

In addition, there are scores ofincorporated Australian charities that,although not publicly traded, would beforced to similarly rotate auditors underthis new legislation. The ICAA foundthat the additional burden that the pro-posed law would place on the auditorsof incorporated local community groupshas caused many to consider withdraw-ing from auditing altogether.

Lori Pizzani is a New York-based finan-cial journalist.

Asia-PacificADVOCACY

Sarbanes-Oxley-Like Proposals Debut Down UnderCommonwealth of Australia set to legislate new auditor rules, corporate disclosure

we ended up with unduly prescriptivearrangements as a solution, says BillPalmer, general manager of standardsand public affairs for the Institute ofChartered Accountants in Australia(ICAA), which represents 40,000 mem-bers from 5,000 to 6,000 audit firms.

Of particular concern to the ICAAis how small- to medium-sized listedcompanies would comply with newrules, especially the proposed five-yearauditor rotation requirement, Palmernotes. Of Australias 1,500 listed com-panies, there are about 100 major cor-porations, with a second tier of 200 to300 mid-sized companies. But, beneath

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C F A M A G A Z I N E / M A R C H - A P R I L 2 0 0 4 17C F A M A G A Z I N E / M A R C H - A P R I L 2 0 0 4 17

BILL HIGHLIGHTS

Among other things, the Australian legislative bill calls for:

The restructuring of the Australian Auditing and Assurance Standards Board(AuASB), which would make auditing standards, formulate guidance on audit-ing standards, and participate in the development of a single set of globalauditing standards;

Auditors to refuse an engagement if conflicts of interest exist;

Individual listed company auditors to serve no more than five successive years,then be rotated. Also, exiting individual auditors would not be allowed to beemployed by a former audit client as a director or senior manager for two years;

Audit firms to be allowed to register with the Australian Securities and Invest-ments Commission (ASIC) as long as they agree to provide annual statements in lieu of the current triennial filing schedule;

Listed companies CEOs and CFOs to declare in writing that the financial recordsof the company have been properly maintained, and that the financial statementsboth adhere to accounting standards and present a true and fair view of thecompany;

The establishment of a Financial Reporting Panel with no fewer than five mem-bers, which will mediate disputes on a non-binding basis between companiesand the ASIC regarding whether a companys financial statements provide atrue view of the company;

Persons who report breaches (whistleblowers) to be protected from civil orcriminal liability or other repercussions;

The disclosure of the remuneration of an expanded list of senior corporate executives and directors of listed companies in the annual directors report;

The imposition of up to A$100,000 in penalties for a breach of continuous disclosure requirements.


EuropeADVOCACY

Europe Remains Divided on Adoption of Financial Instruments Accounting StandardsBY RHEA WESSEL

ccounting scandals havecome to town in Europe,and the unwanted visitorsseem to be here to stay.

The Italian dairy food companyParmalat first spoiled Europes record in December 2003 when it revealed thatit had misplaced what is estimated tobe between US$8 billion and US$13 billion. It later emerged that Parmalathad created fictitious accounts, and billions in assets simply vanished.

Then came Adecco, which admit-ted to possible accounting issues in certain countries. The Switzerland-based global employment agency waspromptly downgraded by analysts afterits announcement in January 2004.

The news was fodder for people try-ing to bring more transparency to Euro-pean accounts. In 2005, listed compa-nies in Europe will be required to reporttheir numbers using all InternationalAccounting Standards (IAS) except IAS32 and 39. For the moment, these twostandards have not been adopted by theEuropean Commission (EC).

As the deadline nears for switchingto IAS, the EC will have to decidewhether these standards on accountingfor financial instruments will be adopt-ed. The standards require companies torecord derivatives at fair market valuerather than historic cost.

Those who support the standards,including AIMR, the International Ac-counting Standards Board (IASB) basedin London, UK, and the Financial Ac-counting Standards Board (FASB) of theUnited States, say the standards protectinvestors and are an important part of acomplete picture of a companys health.

The current standards are the bestavailable standards, and Europe cannotsimply continue without standards onfinancial instruments, they argue. Fur-thermore, those in favor say European

dissenters are making the disagreementa political one because they lack a com-pelling argument. And, if Europe failsto adopt the standards, the transatlanticeffort to converge standards could be atrisk, supporters say.

Those against the standards, name-ly European banks and insurance com-panies, argue that they would bringvolatility to accounts, and that volatilitywouldnt reflect underlying risk.

There are no standards in Europedealing with financial instruments and Europe has almost no derivativeson its balance sheets, except for the fewcompanies that are using IAS, says SirDavid Tweedie, head of the IASB.These things can destroy companies. Weve got to get derivatives on thebalance sheet.

Sir David adds: I only know whatI read in the press about Parmalat, butit sounds like derivatives are involved.This raises the question, Did they use

derivatives to try to recover their lossesor did the derivatives cause the losses?According to news reports, Parmalatused derivatives and other financialtransactions during the past years.

Supporters of the ongoingimprovements to IAS 32 and 39 saythat the complicated nature of deriva-tives makes the standards imperfect,but no one has yet come up with a bet-ter standard. International accountingstandards are created through a long,tedious process of consultation withany group that cares to share its viewon the issues put forth.

A lot of companies just arent accus-tomed to the type of discipline [requiredby IAS 32 and 39], says Wayne Upton,a spokesman for the IASB.

As Good as It Gets

Ken Wild, the London-based globalleader for International AccountingStandards at Deloitte Touche Tohmatsu,says a root problem with IAS 32 and 39is its foundation in the system of cost-based accounting. Were basically in acost-based regime, but were imposingvalue into it, Wild says.

The controversy is about the meth-ods by which IAS 39 would account forderivatives used for hedging, and thefinancial instruments they are suppos-edly hedging. Under the standard, firmswould have to account for the deriva-tives on their balance sheets at their fairmarket value, with changes in the fairvalue reported in periodic net income.Firms would have the option of 1)continuing to use traditional cost as thebasis for reporting the hedged instru-ment, or 2) valuing the hedged instru-ment (by periodic remeasurement) atfair value.

Another sticking point is the argu-ment by those who oppose IAS 32 and39 that derivatives should be valued athistorical cost. Even though the cost ofa derivative is frequently zero, record-ing that cost at historical value doesntmake sense because a change in interestrate can swing an asset to a liability orvice versa.

A

There are no standardsin Europe dealing withfinancial instruments and Europe has almost

no derivatives on itsbalance sheets, exceptfor the few companies

that are using IAS.These things can

destroy companies. Weve got to get deriva-

tives on the balancesheet.

SIR DAVID TWEEDIEHead of the IASB


Arguments for historical costs justdont work on derivatives, says Upton.You can solve a problem by hedgeaccounting, but you dont solve it bypretending that the derivatives areworth zero.

Bob Herz, chairman of the FASB,said the United States learned this les-son the hard way: I dont know howyou can carry derivatives at a zeroamount. We saw in the United States inthe early 1990s all of the problemsassociated with that. Thats what led tothe United States changing standardsaround derivatives.

Even with the inherent problemsin accounting for derivatives, Wild saysan incomplete set of standards isnt theanswer, and IAS 32 and 39, in theircurrent form, are the best standards todate. IAS 39 is stacked with prob-lems, Wild says. If you said to me,

Do you like 39? Id say no. But doesEurope have to have a standard? Yes.Is it the best we have? Yes.

Herz concurs: You cant have a setof accounting standards that has a bighole in it.

Hot Potato Politics

The disagreement about IAS 32 and 39has been elevated to the political playingfield, with dissenters saying the IASB istrying to force an American-based stan-dard on European companies. Support-ers say politics was brought into themix to make up for a lack of empiricalevidence that shows that the standardsare harmful to certain companies.

Jim Leisenring, the liaison betweenthe IASB and the FASB, suspects thatconstituents garnered support from theEC when they saw that their argumentwas failing.

What I find disturbing is thatwhen the EC approved standards for2005, IAS 39 was in existence. Whynow did they decide that IAS 39 isunacceptable? says Leisenring. Headds, I cannot answer why a politicianwould want to obfuscate the informa-tion that goes to the market.

Insurance companies and banksthat oppose the standards have saidtheir interests and the complexities oftheir businesses werent consideredenough in the formulation of the stan-dards, according to press reports.

Convergence Kaput?

The current disagreement on IAS 32and 39 is significant because of itspotential impact on two grand projects:efforts to harmonize transatlantic capi-tal markets and transatlantic conver-gence of accounting standards. If theEC fails to adopt IAS 32 and 39, Euro-pean-based multinationals with listingsin the United States may still have tosubmit their accounts under US rules.

In the investment community,people would like to be able to comparea major European company with a majorAmerican company in the same sector.The best way to do that is with compa-rable accounting numbers, says Herz.

On the matter of financial instru-ments, US and European accountingrules are essentially converged. Howev-er, if the European Union doesntrequire companies to adopt IAS 32 andIAS 39, a separate accounting regimewill remain for Europe.

In the United States, our enthusi-asm for convergence would be dealt ablow, I think, if in fact Europe says it isin favor of convergence but then says itwants line item vetoes, says Herz.

So, the question remains: Will IAS32 and 39, with all their glory andimperfections, be adopted by the EC? Itappears to be a game of wait and see.

Rhea Wessel is a freelance journalist basedin Frankfurt, Germany. Her stories haveappeared in Barrons, the Wall Street Jour-nal, and the Christian Science Monitor.

EuropeADVOCACY

BET WEEN A ROCK AND A HARD PL ACE

As the head of the International Accounting Standards Board (IASB), Sir David

Tweedie is accustomed to politicking. In fact, he is known for the pleasure he gets

out of a robust discussion.

This penchant serves him well as Sir David pushes on with his mission: adopt-

ing the best possible international accounting standards (IAS).

In the fight surrounding IAS 32 and 39, Sir David has seen the level of political

interest swell. In July 2003, French President Jacques Chirac wrote to the president

of the European Commission, Romano Prodi, to say that IAS 32 and 39 could

have harmful consequences for financial stability. And, according to press reports,

European Central Bank head Jean-Claude Trichet has expressed concern that the

standards could reduce the ability of banks to respond to market shocks.

One European-based observer, who asked not to be identified, said some

European players were hoping to gain compromises on IAS 32 and 39 with compro-

mises on unrelated European issues.

Sir David is not interested in compromises. He has a narrow focus, and hes

not into the compromise game, the person said, adding, Sir David just wants

to get it right. He is not worse than any other standard setter.

The IASB is undergoing a previously scheduled review of its constitution that

is to take place every five years, and those unhappy with the IASB may use the

chance to further voice their concern. Some critics say the board needs to listen

more intently to concerned parties, has become too theoretical, and has too much

on its agenda.


of the NYSE board members who knewof, and willingly approved, the compre-hensive package. Grassos packageincluded an annual salary of US$1.4million, a target annual bonus of atleast US$1 million, and other moniesaccrued under various NYSE benefitplans and deferral agreements.

Although Grasso conceded torelinquishing US$48 million of thatpackage because of the controversy, theNYSEs board of directors ultimatelyasked for, and received, Grassos resig-nation on 17 September 2003.

NYSE Reed-efines Governance

On 21 September 2003, the NYSE boardappointed John Reed, former chairmanand co-CEO of Citigroup, as NYSEsinterim chairman of the board andCEO. In early November, with Reed atthe helm, the NYSE proposed andmembers subsequently approved sweeping changes to the exchangesgovernance structure, including:

1. The installation of a board of direc-tors, all of whose six to 12 members for the first time in the exchangeshistory would be independent ofNYSE management, members, andlisted companies. Board membersmust meet at least quarterly, and mustall stand for election each June. TheNYSE board of directors, as fiduciariesfor the exchange, have oversight forregulatory functions, govern listedfirms, monitor marketplace perform-ance, and are responsible for hiringand firing and approving manage-ment compensation.

2. The appointment by the board ofdirectors of an individual to serve aschairman and a separate individual tobe named CEO (unless the boarddecides that one person may serveboth roles). On 18 December 2003,the new NYSE board of directorsappointed John Thain, president and

CEO of Goldman Sachs Group, asNYSE CEO and a member of theboard of directors beginning 15 Janu-ary 2004. Reed relinquished his CEOtitle, but remains interim chairmanuntil a replacement is named.

3. The creation of a parallel 20-memberboard of executives, which will servein an advisory role to the NYSEboard of directors. Members will beappointed by the NYSE board ofdirectors, and will be comprised ofconstituents of the broker/dealercommunity, specialist firms, floorbrokers, institutional investors(including large public funds),exchange-listed companies, and arepresentative of individual investors.The new board of executives willmeet six times a year to discussmembership issues, listed companyissues, and public issues all related to market structure and performance.The board of executives will meetseveral times throughout the yearwith the board of directors.

4. The hiring of a new chief regulatoryofficer who will report directly to anewly established regulatory oversightand budget committee comprisedsolely of independent directors.Among other things, the committeewill determine the exchanges regula-tory plan and programs. On 8 Janu-ary 2004, the NYSE board namedRichard Ketchum, general counsel atCitigroup, to the new post effective 2 June 2004.

5. Increased transparency, with theNYSE board of directors publishingan annual proxy statement detailingboard membership and compensa-tion, the exchanges political contri-butions, charitable activities, and themeans by which members andinvestors may communicate withboard members. Restructured boardcommittees will also annually disclosethe compensation of the NYSEs topfive officers, as well as how boardnominees are selected.

United StatesADVOCACY

BY LORI PIZZANI

n 2002 and 2003, the New YorkStock Exchange (NYSE) wasamong the securities industrysregulators dictating changes to

bolster corporate governance at publiccompanies, banish securities analystsconflicts of interest, and restoreinvestors faith in the capital markets.

But, as last year unfolded, the NYSEfound itself at the center of a firestormof scrutiny that resulted in the forcedresignation of NYSE Chairman and CEORichard Grasso and an array of signifi-cant structural changes being made tothe worlds largest stock exchange.

The 211-year-old NYSE annuallyserves 85 million direct and indirect in-vestors. As of year-end 2003, it boasteda global market cap of US$16.8 trillion.

It all began in March 2003, whenthe US Securities and Exchange Com-mission (SEC) asked the NYSE, alongwith other self-regulatory organizations,to undertake a review of its own corpo-rate governance policies and reportback on potential improvements. TheNYSE assembled a special committee,and, on 5 June 2003, released a reportoffering 10 recommendations. Includedwas a reform under which the NYSEwould disclose in its annual report thecompensation of the chairman, thedirectors, and the four highest paidNYSE officers. It also suggested pro-hibiting NYSE senior officers from serv-ing on the boards of listed companies.

In August, when Grassos previous-ly undisclosed, but rumored, US$139.5million total compensation package wasrevealed by the NYSE, a new conflict ofinterest controversy arose this timewith Grasso on the hot seat. Criticscharged that Grassos lavish pay pack-age compromised his role as the regula-tor of listed companies and tainted thereputation of the NYSE. Grasso sup-porters pointed to the apparent failings

Bolstering Corporate Governance: NYSE atCenter of Controversy and Restructuring

I

REGULATORYUpdate

Mutual Fund ReformOn 15 January and 20 January 2004, the US SEC released for public comment pro-posals designed to increase investment company governance, and require invest-ment advisers to adopt code of ethics requirements, respectively.

The SECs proposed investment company governance reforms would: requirethat 75 percent of a fund boards members, and the chairman of the board, beindependent; mandate that independent directors meet in separate session atleast once per quarter; and authorize the independent directors to hire employeesto help them fulfill their fiduciary duties. It would also require directors to make annual assessments of their board operations, evaluate the effectiveness of board committee structures, and ask trustees to introspectively determine ifthey oversee too many funds. The rules would also mandate that advisers retaincopies of materials boards used to consider advisory contracts for six years.

Comments, due by 10 March 2004, may be made via e-mail [email protected], with reference to File No. S7-03-04 in the subject line.

The rule requiring investment advisers to adopt codes of ethics for supervisorypersonnel would: have advisers detail expected standards of conduct, includingcompliance procedures; require access persons to initially, then annually, reportsecurities holdings as well as transactions including proprietary mutual fundtrades; mandate obtaining adviser approval before investing in initial publicofferings or private placements; and require employees to acknowledge formalreceipt of ethics codes. It would also safeguard non-public information aboutclient transactions and restrict dissemination of information.

Comments, due by 15 March 2004, may be made via e-mail [email protected], with reference to File No. S7-04-04 in the subject line.

These two sets of proposals follow a trio of regulatory mandates that the SEC float-ed for comment in December 2003. These earlier rules, if finalized, would: man-date a hard 4:00 p.m. market close for submitting fund trades, make fund buyand sell orders irrevocable, and require the designation of a chief compliance offi-cer. They would also require fund advisers to disclose in prospectuses the risks offrequent trading and the companies policies on such, describe under what circum-stances fair value pricing would be used, and describe breakpoint discounts andconditions for eligibility.


United StatesADVOCACY

general counsel at Symbol. Moreover, it allows for another persons uniqueperspective. But, a good personality fitbetween the non-executive chairmanand the CEO, who must work closely,is a must, Lieb adds. If there isnt agood personality fit, the working rela-tionship can be strained and can createits own set of problems.

Lori Pizzani is a New York-based finan-cial journalist.

previously served as the boards leaddirector. Symbol had been under SECscrutiny for accounting problems,resulting in a restatement of financialresults between 1998 and 2002, and ithad seen two CEOs exit.

The biggest advantage to splicingfunctions is that it allows for checksand balances and prevents any one per-son from having too much power, notesPeter Lieb, senior vice president and

Splitting the Role of Chair and CEO

According to new data from theNational Association of CorporateDirectors in Washington, DC, USA,50.4 percent of 5,000 public companiespolled between February and June 2003now separate the role of chairman fromCEO, up from 45 percent in 2001,largely due to corporate scandals.

A separation of powers can behelpful in improving corporate gover-nance, but it doesnt guarantee effectivecontrol, said Scott Stewart, professor at Boston Universitys School of Manage-ment. The key consideration, in myopinion, is the person you place incharge his or her honesty, intelli-gence, and energy level not neces-sarily the governance structure. Onthe flip side, he adds, such a split canreduce the effectiveness of a good leader.

The separation of these functionsis much more common in Europe, saysBetsy Atkins, president and CEO ofBaja, LLC, a venture capital firm inCoral Gables, Fla., USA. There aremany strong advantages to having aseparate chairman. The chairman hasthe sole focus of coordinating, energiz-ing, communicating, and leveragingmaximum contribution from theboard, she says. That separate role canbe useful where a company is in tur-moil and the CEO needs to focus oncorporate repositioning. Atkins adds:The CEO is the operational leader,and, given a choice between spendingtime with the board or leading the com-pany, it is far better to focus on leadingthe company.

Although the debate over splittingroles isnt new, there has been a trend in the United States to augment a com-bined chairman/CEO with a lead direc-tor who serves many of the functionsthat a non-executive chair would,Atkins explains.

On 30 December 2003, SymbolTechnologies in Holtsville, NY, USA, apublicly traded company, named a newnon-executive chairman in a move toseparate roles and bolster corporategovernance. The new chairman had

regulator [its] securities regulatoryarchitecture must change so that ourcapital markets become a source ofcomparative advantage.

There was a time when Canadianbusinesses seeking to raise capital wereprimarily located in the same region asthe investors who bought their securi-ties, continues the report. In thosedays, Canada was well-served by aprovincially-based regulatory structure.Those days are gone.

The WPC report says the nationalgovernment in Ottawa should pass anew securities act that would applyeverywhere. To take into accountregional concerns, the law would beadministered by a nine-member groupof commissioners from across the coun-try. Ontario and Quebec, where mostsenior public companies are located,would be guaranteed two spots each,while British Columbia (BC) and Alber-ta the traditional home of the juniormarkets would each have at least one.

Under the WPCs proposal, once


CanadaADVOCACY

BY DEREK DECLOET

blue-ribbon panel formed byCanadas finance departmentrecently released a report recommending the creation

of a national securities regulator endorsing an idea that AIMR has beenadvocating for years.

The Wise Persons Committee(WPC) appointed in March 2003 toreview securities regulation in Canada says in its report that the federal andprovincial governments should cooper-ate to build a single regulator adminis-tering a single code that would replacethe countrys patchwork of provincialand territorial agencies, as Australia didduring the 1990s.

There is a new and unprecedentedconsensus for change, says the reportof the committee, led by MichaelPhelps, the former chief executive offi-cer of Westcoast Energy Inc. Today,Canada is the only major industrializedcountry without a national securities

the new regime is in place, the federalgovernment would be required to con-sult provincial governments beforemaking any changes to securities law. It would not proceed with any changethat was opposed by a majority ofprovinces representing a majority of the population.

The drive to create a national regu-lator has been around for decades, andseveral previous attempts to create onehave failed, usually because the provin-cial governments are reluctant to giveup their authority over securities mat-ters. The matter was given new urgency,though, by several high-profile Canadi-an scandals in Canada in the late 90s,including the Bre-X Minerals gold fraudand the accounting shenanigans thatled to the collapse of entertainmentcompany Livent Inc.

I think it can be done, and I thinkit should be done, says David Yu, co-chair of AIMRs Canadian AdvocacyCommittee. Yu says it is amazing thatCanada is one of the last countries tohave no national securities body: If[regulation] is run by one organization,it is certainly better than being run by a group of people. It makes life simpler

Wise Persons Committee Supports Creation of National Securities Regulator

A

AIMR REPRE SENTATIVE S PRE SENT MEMBERS VIEWS

The week before the release of the Wise Persons Committee(WPC) report, AIMR representatives took their views directly to Canadas most powerful securities regulator: David Brown,chairman of the Ontario Securities Commission (OSC).

Brown has been pushing for his own version of a singleregulator, though, unlike the WPCs, his vision is that theprovinces would pool their current powers under a singleagency. David Yu, co-chair of AIMRs Canadian Advocacy Com-mittee, presented the results of the 2003 AIMR survey showinga large majority of

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