On Nov. 5, the Securities and Exchange Commission (SEC), in cooperation with New York Attorney General Eliot Spitzer and the Officer of the Comptroller of the Currency, brought civil fraud charges against an Arizona-based company. The company is alleged to have facilitated and participated in fraudulent late trading and market timing schemes by a group of hedge funds. The case is just another in a string of recent developments in a growing investigation of illegal trading practices taking place in the mutual fund industry.
With a growing pile of evidence of problems in the mutual fund industry, the need for change is obvious. And to help address the problems, companies may turn to a new certification program from Acadient, a developer and distributor of online education, developed with the National Investment Company Service Association (NICSA). The Certified Mutual Fund Specialist (CMFS) program is based on the book, “A Purely American Invention: The U.S. Open-End Mutual Fund Industry,” by Lee Gremillion, a consultant with PricewaterhouseCoopers. Many companies have used the book as the basis for learning initiatives within their own companies, according to Bob Goldberg, managing director of Acadient and formerly the senior compliance officer of John Hancock Distributors and president of the NICSA. Goldberg was involved in the authoring of the book as well as the new certification program.
The CMFS certification is a Web-based training program for professionals working in the mutual fund industry. The program is made up of three courses with a total of 14 modules. The courses—Overview of the Mutual Fund Industry, Mutual Fund Operations and Mutual Fund Distribution and Marketing—take nearly 4 hours to complete.
According to Barbara V. Weidlich, current president of NICSA, the association is introducing the designation to its 400 member firms and their employees in addition to other companies and associations in the industry. Companies can use the certification program as a part of their employee training and development or as an enterprise-wide education program.
“We have one company that uses a couple of the modules with new potential hirees by saying to them, ‘Sit down, go through these two modules, tell us what you think about the industry. Are you still interested?’ And this is a very effective way to let somebody know before they get into the business what it’s all about,” said Goldberg.
The certification program can be helpful in numerous areas of the business. For example, most customer service goes through the call center. According to Goldberg, most of the call-center employees generally have one to two years of college education. “The interesting thing is, when they start out, they get a course like ours to give them a feel for it, and then the company will take them through what’s pertinent for that company,” Goldberg explained. “The problem is these are the lowest-paid people in the sequence who are dealing with all the investors. So what you have is a potential for some real problems simply because an investor calls into the call center and somebody inadvertently says something in the wrong way or makes a mistake—the investor will probably have more sophistication than the call center person in the beginning.” By requiring employees to take a course introducing them to the industry, mutual fund companies can ensure that their employees with the most direct customer contact have the knowledge they need.
“The certification is good because what happens is, as you know, by virtue of taking an e-learning course, the consistency is tremendous,” said Goldberg. “It’s different than when a trainer goes into a classroom and trains. One trainer may leave out something. Another trainer adds something. This course does not add or subtract—it is what it is, and it doesn’t vary from one event to another.”
And with the government and the public being made more aware of ethical problems in the industry, the CMFS program can help to create more ethical mutual fund industry professionals. “This kind of course gives an awful lot of people good sensitivity to issues that have arisen,” said Goldberg. “It tells you you can’t market time. It also talks about the fact—and it’s a very simple statement—that you can’t trade shares after the close of business. And yet, people trade shares after the close of business. Where this would help you is the more education, the more people who know what’s right, the more likely people are going to do what’s right.”
Goldberg added, “If you want an industry to work better, what you need is both an informed public and an informed vendor group. When both parties are informed, neither is fooled, and therefore you end up with better ethics. There’s never been a more important time for people to be educated.”
Goldberg said that of the top 50 mutual fund companies, Acadient does business with about half, in various degrees. When a company can say that its employees are certified in the mutual fund program, it creates a standard, Goldberg said. “While the investor may not understand the program, the investor certainly feels something better that says the people I deal with are certified to deal with mutual funds on some basis,” said Goldberg. He likened the situation to the doctor’s office, where the first thing the patient looks for is evidence of the doctor’s credentials.
“In this day and age of silo management, where the company’s gotten big, people can grow up in one area of the company,” said Goldberg. The CMFS program, he explained, allows for more crossover, so employees understand the various functions within the company.
To learn more about the CMFS program, visit http://www.acadient.com.
Emily Hollis is associate editor for Chief Learning Officer Magazine. She can be reached at ehollis@clomedia.com.
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