CFAs worry about derivatives

The disclosure and use of financial derivatives by financial firms is the biggest concern of the nation's leading financial analysts. In a survey of its members conducted in January, the CFA Institute found that 23% of more than 5,700 respondents are worried about derivatives as a serious ethical issue — more than the number concerned about market fraud and financial reporting. The data are designed to help regulators and financial professionals identify ethical “hot spots” facing the financial services industry. “Sadly, only one-third of respondents are optimistic that the integrity of capital markets will be better in 2011 than in 2010,” said Kurt Schacht, managing director of the CFA Institute's standards and financial market integrity division. “A more optimistic view of financial market integrity will likely depend on increased global transparency of risk and risk-related instruments, and better regulatory coordination of systematic risk detection and mitigation,” he said. About half of the respondents believe it will take three to five years for the full effects of the credit crisis to dissipate, while 19% think it will take less than two years; 32% of CFA Institute members, however, see the effects lingering for more than five years.