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October 28, 2002 12:00 AM

DISSIDENT SLATE: Group unhappy with AIMR policies seeks voice through board election

Barry B. Burr
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    CHARLOTTESVILLE, Va. - AIMR is facing opposition to its policies on standards-setting, membership and internal governance, and is being accused of conflicts of interests.

    Eight members of the Association for Investment Management and Research Inc., Charlottesville, are seeking to nominate themselves to the board of governors. They have formed a coalition, campaigning to have the first competitive election in the association's history over discontent with AIMR's governance, policies and mission.

    The coalition is concerned with, among other issues, the research objectivity standards proposed by AIMR for firms in the investment management business to deal with conflicts of interests of securities analysts.

    The research objectivity standards proposal "represents a bit of grandstanding" by AIMR, said James I. Hymas, principal, Hymas Investment Management Inc., Toronto, and one of the dissident board candidates.

    "Institutional investors can only benefit from better governance at AIMR," Mr. Hymas said. "Institutional money is managed almost exclusively by AIMR members, one way or the other."

    On another front, Bruce I. Jacobs, principal, Jacobs Levy Equity Management Inc., Florham Park, N.J., is questioning AIMR's own internal conflicts of interest and lack of internal accountability and ethics standards.

    Expand the proposal

    In a six-page letter commenting on the research objectivity standards, Mr. Jacobs suggests AIMR expand the proposal to deal with its own internal potential conflicts of interests, such as with AIMR's publications, in particular its Financial Analysts Journal.

    "(W)ork done for and by AIMR and its professional publications and conferences is susceptible to being influenced by (commercial) interests that may conflict with the best interests of members and investors in general," Mr. Jacobs wrote in his letter posted on AIMR's website, www.aimr.org.

    Jose M. Arau, principal investment officer of the California Public Employees' Retirement System, writing to AIMR on behalf of the Security Analysts of Sacramento, as its president, formally endorsed Mr. Jacobs' proposal to expand the standards.

    "It appears that it would be highly beneficial if AIMR were to develop a set of conflict-of-interest standards for its publications and conferences," Mr. Arau wrote in his letter to AIMR, posted on its website.

    Linda R. Killian, principal of Renaissance Capital, Greenwich, Conn., a coalition member seeking nomination to the board, said on the coalition's website, www.analystvoice.org: "The proposed (research objectivity standards) cover corporate issuers, investment management firms, investment banks, broker-dealers and the media. However, AIMR has absolutely no jurisdiction over any of the entities."

    Coalition members express other concerns, too. "AIMR is attempting to increase its membership at all cost, regardless of what the increase means in the devaluation of the charter," Mr. Hymas said.

    Mr. Hymas criticized the AIMR for diluting the rigor of CFA exams and questioned how well work experience is authenticated for CFA candidates.

    As for the board election, AIMR has never had a contested election for the board, confirmed Richard Wyler, director-public communications.

    Board members can be nominated only two ways: a formal AIMR nomination committee picks candidates, or candidates get 5% of the membership to sign nomination petitions, which hasn't been done. "It's not easy getting 3,000 signatures," Mr. Hymas said. AIMR has 61,000 members.

    Process is flawed

    "We think the nomination process is flawed and doesn't reflect good governance," Mr. Hymas said. "We'd like to see election campaigns with winners and losers."

    The election will be held at the next annual meeting, in May in Phoenix. The board now consists of 18 elected governors and AIMR's president. One-third, or six, governors are elected annually. The board, however, can expand to 25, meaning at the next election anywhere from six to 12 governors could be elected.

    Mr. Hymas said the eight members campaigning for nominations to AIMR "don't have a formal unifying platform. We are more of a coalition. We have our disagreements with each other, but we have enough common purpose to cooperate."

    Mr. Wyler disputed the charges of the coalition.

    "Our mission statement is to advance the interest of the global investment community," Mr. Wyler said in response to complaints about the research objectivity standards proposal being beyond AIMR's mission. "Although we are an individual (membership) organization, we believe we serve the investment community."

    He sees no problem in AIMR having no enforcement provision in its research standards proposal, "just as we don't enforce the performance presentation standards."

    In terms of qualifying work experience for CFA candidates, Mr. Wyler said, "Our auditing of work experience has not exposed a problem."

    As for internal ethics, he said, "If someone believes we've fallen short of ethical standards, we would like them to bring it to our attention."

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