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CFA Institute launches global Code of Conduct for Pension Schemes

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The Centre for Financial Market Integrity (CFA) has launched the “Code of Conduct” for Members of a Pension Scheme Governing Body to help such individuals manage their ethical responsibilities. Funding pension schemes and securing the financial future of pension participants and beneficiaries is a growing global challenge as longevity and ageing populations become critical issues in many countries. Accordingly, the role of pension scheme trustees in managing private and institutional pension fund assets assumes greater importance. With over USD 25 trillion in global institutional pension fund assets(1) and an investment landscape becoming ever more complex, trusteeship on a pension scheme board carries a great burden of responsibility.

The Code sets forth 10 fundamental ethical responsibilities for individuals who sit on the governing bodies of pension funds worldwide. Though voluntary, the CFA Institute Centre encourages pension plans to adopt the Code to establish an ethical framework for governing board members and to demonstrate their commitment to serving the best interests of participants and beneficiaries. 

The Code has kept the list of responsibilities high-level and principle-based, so as to address the primary ethical principles that a member of the governing body should follow, rather than prescribing the specific duties or detailed functions that a trustee should accomplish. The Code is globally applicable and the principles outlined provide best practice regardless of where the pension scheme is formed or managed. The working group which produced the Code has strived to accommodate different types of pension schemes and standards into one global standard for ethical conduct that pension trustees should follow.  The result is a Code that can be incorporated into existing internal procedures and give focus to high ethical standards. 

Jon Stokes, director, Standards of Practice, CFA Institute Centre for Financial market Integrity, said: “The conduct of those who govern pension schemes significantly impacts the lives of millions of people around the world who are dependent on pensions for their retirement income. Just as shareholders trust corporate directors to look out for their best interests in a corporate setting, trustees are charged with looking out for the interests of the participants in and beneficiaries of pension schemes. The Code establishes just that through the provision of 10 fundamental ethical principles.”   

Mark Anson, CFA, president and executive director of Nuveen Investments and member of CFA Institute Board of Governors, commented: “There are many things for an individual member of a pension governing board to consider in undertaking such a role but acting to the highest ethical standards should be foremost in their minds. The Code is a valuable reference tool, applicable regardless of jurisdiction and type of scheme, which can be used to address ethical responsibilities and best serve the interests of participants and beneficiaries”. 

The Code of Conduct for pension trustees is as follows:  

1. Act in good faith and in the best interest of the scheme participants and beneficiaries.
2. Act with prudence and reasonable care.
3. Act with skill, competence, and diligence.
4. Maintain independence and objectivity by, among other actions, avoiding conflicts of interest, refraining from self-dealing, and refusing any gift that could reasonably be expected to affect their loyalty.
5. Abide by all applicable laws, rules, and regulations, including the terms of the scheme documents.
6. Deal fairly, objectively, and impartially with all participants and beneficiaries.
7. Take actions that are consistent with the established mission of the scheme and the policies that support that mission.
8. Review on a regular basis the efficiency and effectiveness of the scheme’s success in meeting its goals, including assessing the performance and actions of scheme service providers, such as investment managers, consultants, and actuaries.
9. Maintain confidentiality of scheme, participant, and beneficiary information.
10. Communicate with participants, beneficiaries, and supervisory authorities in a timely, accurate, and transparent manner. 


Juan Yermo, principal administrator, Private Pensions Unit, Directorate for Financial and Enterprise Affairs Organisation for Economic Co-operation and Developments (OECD), and a member of the working group that produced the Code, concluded: “Around the world pension funds are undergoing a major drive to modernise their governance structures and methods. The CFA code of conduct, which complements the OECD guidelines on pension fund governance, provides a much needed global template for the industry, raising the bar of competence and integrity in pension fund boards and hence ultimately strengthening pension protection.”  




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