The Chartered Financial Analyst (CFA) Program is a
professional credential offered internationally by the American-based CFA
Institute (formerly the Association for Investment Management and Research, or
AIMR) to investment and financial professionals. A candidate who successfully
completes the program and meets other professional requirements is awarded the
"CFA charter" and becomes a "CFA charterholder". As of July
2014, there are approximately 120,000 CFA members in 35 countries. The top
employers of CFA Charterholders globally are UBS, JP Morgan, Citigroup, Morgan
Stanley, and BlackRock.
Successful candidates take an average of four years to earn
their
CFA charter. The program covers a broad range of topics relating to
investment management, financial analysis, stocks, bonds and derivatives, and
provides a generalist knowledge of other areas of finance.
The CFA program began in the United States but has become
increasingly international with many people becoming charterholders across
Europe, Asia and Australia. By 2003 fewer than half the candidates in the CFA
program were based in the United States and Canada, with most of the other
candidates based in Asia or Europe. The number of charterholders in India and
China had increased by 25% and 53%, respectively, from 2005-06.
Overview
The top employers of CFA Charterholders globally are UBS, JP
Morgan, Citigroup, Morgan Stanley, and BlackRock.
Functions often
performed by CFA charterholders:
• Securities
research
• Fundamental
analysis
• Valuation
(finance)
• Equity
(finance)
• Discounted
cash flow
• Investment
management
• Portfolio
manager
Entities frequently
employing CFA charterholders:
•
• Registered
Investment Advisor
• Investment
advisory
• Financial
adviser
• Separately
managed account
• Mutual
fund
• Hedge
fund
Requirements
To become a charterholder, candidates must satisfy the
following requirements:
• Have four
years (48 months) of qualified work experience (or a combination of education
and work experience acceptable by the CFA Institute). However, individual level
exams may be written prior to satisfying this requirement;
• Complete
the CFA Program (mastery of the current CFA curriculum and passing three
six-hour examinations);
• Become a
member of the CFA Institute and apply for membership to a local CFA member
society;
• Adhere to
the CFA Institute Code of Ethics and Standards of Professional Conduct.
Independent of any other requirements for becoming a
charterholder, the CFA Program takes an average of four years for candidates to
complete.
Process
|
Year
|
Level
1
|
Level
2
|
Level
3
|
|
2015 Pass rate %
|
42%/43%
|
46%
|
53%
|
|
2014 Pass %
|
44%
|
46%
|
54%
|
|
2013 Pass %
|
38%/43%
|
43%
|
49%
|
|
2012 Pass %
|
38%/37%
|
42%
|
52%
|
|
2011 Pass %
|
39%/38%
|
43%
|
51%
|
|
2010 Pass %
|
42%/36%
|
39%
|
46%
|
|
2009 Pass %
|
46%/34%
|
41%
|
49%
|
|
2008 Pass %
|
35%
|
46%
|
53%
|
|
2007 Pass %
|
39%
|
40%
|
50%
|
|
2006 Pass %
|
40%
|
48%
|
76%
|
|
2005 Pass %
|
35%
|
56%
|
55%
|
|
2004 Pass %
|
35%
|
32%
|
64%
|
|
2003 Pass %
|
41%
|
47%
|
68%
|
|
2002 Pass %
|
44%
|
47%
|
58%
|
|
Weighted Mean of Pass %
|
39.70%
|
44%
|
57.70%
|
The basic requirements for participation in the CFA Program
(with or without obtaining the charter) include holding a university degree or
being in the final year of a university degree program (or equivalent as
assessed by the CFA Institute), or having four years of qualified, professional
work experience in an investment decision-making process. To obtain the
charter, however, a candidate must have completed a university degree (or
equivalent) and four years of qualified, professional work experience, in
addition to passing the three exams that test the candidate's knowledge of the
academic portion of the CFA program. However, an accredited degree may not be a
requirement.[7][8]
Candidates take one exam per year over three years, assuming
a pass on the first attempt. Fees as of December 2009 for each exam range from
$710 to $955, depending on the date on which the candidate registers to take
the exam, plus an additional $400 to $480 for program enrollment for new
members. Level II and III pass rates apply to candidates that must have already
passed the prior level(s).
All three exams are administered on paper on a single day;
the Level I exam is administered twice a year (usually the first weekend of
June and December). The Level II and III exams are administered once a year,
usually the first weekend of June. Each exam consists of two three-hour
sessions. Level I has 240 independent, multiple-choice questions—all information
required to answer the question is contained in the question. Level II has 120
multiple-choice questions, organized as 20 six-question item sets, each set
having its own vignette of facts. To answer each question, the candidate must
refer to the vignette as there is insufficient information in the question
stem. Level III consists of a session of constructive response, essay-type
questions, and a session of 10 six-question item sets as in the Level II exam.
On the multiple-choice/item set sections, there is no penalty for wrong
answers. For the test, only two models of calculator are allowed (the Hewlett
Packard 12C including the HP 12C Platinum, and the Texas Instruments BA II Plus
including the BA II Plus Professional).
Candidates who have taken the exam receive a score report
that is intended to be fairly unspecific: there is no overall score for the
test, only a Pass/Fail result, and a range within which his or her performance
for each topic area falls: below 50%, between 50% and 70%, and above 70%.
Failing candidates are informed of their decile rank within the body of failing
candidates. The passing grade for the exams had been defined as 70% of the top
percentage of exam papers until 1989; since then, the grading method is not explicitly
published and the minimum passing score is set by the Board of Governors after
each exam. The Board of Governors reviews the results of the standard setting
process and input from psychometricians
Standard setting is a process that defines the passing score of the exam. The
CFA exam uses the modified And off method which is a commonly used approach to
setting standards for certification and licensure examinations. Subject matter
experts review the exam and recommend a minimum passing score for the
"just-qualified candidate". The minimum passing scores are presented
to the Board of Governors in a report. The Board of Governors is not bound by
this recommendation, but does recognize it as a very important information
Providers
CFA-approved
university programs
CFA also has a list of accredited education partners who
provide relevant courses and CFA education preparation. There are 60 partners
in North and South America, 40 partners in Asia Pacific, and 49 partners in
EMEA.
CFA-prep course
providers
CFA also has a list of organizations that provide
CFA study support.
The organizations that participate agree to adhere to strict quality standards
and practices outlined by CFA Institute.
Curriculum
2016 Level III CFA
Program Curriculum
The curriculum for the CFA program is based on a Candidate
Body of Knowledge established by the CFA Institute. The curriculum comprises
the topic areas below. There are three exams ("levels") that test the
academic portion of the CFA program. All three levels emphasize the subject of
ethics. The material differences among the exams are:
• The Level
I study program emphasizes tools and inputs, and includes an introduction to
asset valuation, financial reporting and analysis, and portfolio management
techniques.
• The Level
II study program emphasizes asset valuation, and includes applications of the
tools and inputs (including economics, financial reporting and analysis, and
quantitative methods) in asset valuation.
• The Level
III study program emphasizes portfolio management, and includes descriptions of
strategies for applying the tools, inputs, and asset valuation models in
managing equity, fixed income, and derivative investments for individuals and
institutions.
For exams from 2008 onward, candidates are automatically
provided the curriculum readings from CFA Institute at the time of registration
for the exam. The curriculum is not provided separately in the absence of exam
registration. If the student fails an exam and is being allowed to resit in the
same year, the CFA Institute offers a slight rebate and will not send the
curriculum again (the curriculum changes only on an annual basis). If the
student resits in a year other than the year of failure, he or she will receive
the curriculum again, as it may have been changed. Study materials for the CFA
Exams are available from numerous commercial learning providers, although they
are not officially endorsed.
Ethics
The Code of Ethics
Members of CFA Institute, including charterholders and
candidates for the CFA designation, must:
• Act with
integrity, competence, diligence, respect, and in an ethical manner with the
public, clients, prospective clients, employers, employees, colleagues in the
investment profession, and other participants in the global capital markets.
• Place the
integrity of the investment profession and the interests of clients above their
own personal interests.
• Use
reasonable care and exercise independent professional judgment when conducting
investment analysis, making investment recommendations, taking investment
actions, and engaging in other professional activities.
• Practice
and encourage others to practice in a professional and ethical manner that will
reflect credit on ourselves and the profession.
• Promote
the integrity of, and uphold the rules governing, capital markets.
• Maintain
and improve their professional competence and strive to maintain and improve
the competence of other investment professionals.
The ethics section is primarily concerned with compliance
and reporting rules when managing an investor's money or when issuing research
reports. Some rules pertain more generally to professional behavior (such as
prohibitions against plagiarism); others specifically relate to the proper use
of the designation for charterholders and candidates. These rules are
delineated in the "Standards of Professional Conduct", within the
context of an overarching "Code of Ethics"; see sidebar.
Quantitative methods
This topic area is dominated by statistics: the topics are
fairly broad, covering probability theory, hypothesis testing, (multi-variate)
regression, and time-series analysis. Other topics include time value of
money—incorporating basic valuation and yield and return
calculations—portfolio-related calculations, and technical analysis
Economics
Both microeconomics and macroeconomics are covered,
including international economics (mainly related to currency conversions and
how they are affected by international interest rates and inflation). By Level
III, the focus is on applying economic analysis to portfolio management and
asset allocation.
Corporate finance
The curriculum includes the more fundamental corporate
finance topics—capital investment decisions, capital structure policy, and dividend
policy—as well as advanced topics such as the analysis of mergers and
acquisitions,corporate governance, and business and financial risk
Financial reporting
and analysis
The curriculum includes analyzing financial reporting topics
(International Financial Reporting Standards and U.S.Generally Accepted
Accounting Principles), and ratio and financial statement analysis. Financial
reporting and analysis of accounting information is heavily tested at Levels I
and II, but is not a significant part of Level III
Security analysis
The curriculum includes coverage of global markets, as well
as analysis of the various asset types: equity (stocks), fixed income (bonds),
derivatives (futures, forwards, options and swaps), and alternative investments
(real estate, private equity, hedge funds and commodities). The Level I exam
requires familiarity with these instruments; the focus of Level II is
valuation; Level III studies incorporation of these instruments into portfolios.
Level II employs the "tools" studied under the quantitative methods,
financial statement analysis, and corporate finance and economics curricula.
Portfolio management
This section increases in importance with each of the three
levels—it integrates and draws from the other topics, including ethics. It
includes: modern portfolio theory (efficient frontier, capital asset pricing
model, etc.); investment practice (defining the investment policy for
individual and institutional investors, resultant asset allocation, order
execution); and measurement of investment performance.
