The Chartered Financial Analyst (CFA) designation is an international professional certification offered by the CFA Institute (formerly AIMR) to financial analysts who complete a series of three examinations. To become a CFA Charterholder candidates must pass each of three six-hour exams, possess a bachelor's degree (or equivalent, as assessed by CFA institute) andhave 48 months of qualified, professional work experience. CFA charterholders are also obligated to adhere to a strict Code of Ethics and Standards governing their professional conduct.

The CFA designation

The CFA is a qualification for finance and investment professionals, particularly in the fields of investment management and financial analysis of stocks, bonds and their derivative assets. The program focuses on portfolio management and financial analysis, and provides a generalist knowledge of other areas of finance.

The CFA designation was first awarded in 1963.As of August 2010, CFA Institute has more than 101,000 members around the world, including more than 89,000 CFA charterholders.

History

The predecessor of CFA Institute, the Financial Analysts Federation (FAF), was originally established in 1947 as a service organization for investment professionals in its societies and chapters. In 1990, in hopes of boosting the credential's public profile, CFA Institute (formerly the Association for Investment Management and Research or AIMR) was created from the merger of the FAF and the Institute of Chartered Financial Analysts (ICFA). Many Financial Analysts (FA credential) were "grandfathered" into CFA charterholders without taking any of current levels as a result of the 1990 merger between the ICFA and FAF.

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 US and Canada, with most of the other candidates based in Asia or Europe. India and China have shown some of the highest growth from 2005-2006 with increases of 25% and 53% respectively in the total number of charter holders.

Requirements

The basic requirements for participation in the CFA Program include holding or being in the final year of a university degree (or equivalent as assessed by 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 academic portion of the CFA program.

Candidates generally take one exam per year over three years (assuming a pass on the first attempt). Fees as of December 2009 for all three exams 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. Exams are challenging, with only 42% passing the Level I, 39% passing Level II, and 46% passing Level III exam in June 2010.In 2006, Europe achieved the highest average pass rate for the Level I, II and III of the exam with an overall success rate of 57% of candidates versus 54% for the USA and 49% in Asia and Pacific.

All three levels have a strong emphasis on 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 strategies for applying the tools, inputs, and asset valuation models in managing equity, fixed income, and derivative investments for individuals and institutions.

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 is multiple choice - all information required to answer the question is contained in the question. Level II is item set - a vignette followed by selected response questions. 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 short-answer questions and a session that is item set. On the multiple-choice/item set sections, there is no penalty for wrong answers.

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. However, candidates who fail are informed of how well they did compared to other candidates who failed; e.g., top 10% of candidates who failed. For each topic area (e.g., ethics, corporate finance, derivative securities, and so on), each test-taker is given a broad range within which his or her performance falls: below 50%, between 50% and 70%, and above 70%. 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 utilizes the modified Angoff 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 very important information.

The CFA curriculum

The curriculum for the CFA program is based on a Candidate Body of Knowledge established by CFA Institute. For exams from 2008 onward, candidates automatically receive the curriculum readings from CFA Institute when they register for the exam. There is no possibility to register for the exam without receiving the curriculum. There is also no possibility to order the curriculum separately. If the student fails an exam and has the possibility to resit in the same year, CFA Institute offers a slight rebate and will not send the curriculum again (the curriculum only changes from one year to the next). However if the student resits in another year than the year of failure, he will receive the curriculum again as it may have been changed. For the test, only two calculators are allowed (the Hewlett Packard 12C and the Texas Instruments BA II Plus).

The curriculum includes these topic areas:

• Ethical and Professional Standards
• Quantitative Methods (such as the time value of money, and statistical inference)
• Economics
• Financial Reporting and Analysis
• Corporate Finance
• Analysis of Investments (stocks, bonds, derivatives, venture capital, real estate, etc.)
• Portfolio Management and Analysis (asset allocation, portfolio risk, performance measurement, etc.)

Study materials for the CFA Exams are available from numerous learning providers.

Ethics

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. All of these rules are delineated in the 'Code and Standards'.

Quantitative Methods

This topic area is dominated by statistics; other topics such as the time value of money are also addressed. The topics are fairly broad, covering standard ideas such as hypothesis testing, regression analysis and time series analysis, as well as portfolio-related topics. (Some quantitative topics are covered in other sections; for example, calculating depreciation of assets is a part of financial reporting and analysis (accounting), and determining currency arbitrage is a part of international economics.)

Economics

Both micro- 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.

Financial Reporting and Analysis

The Curriculum includes analyzing financial reporting topics (IFRS and GAAP), 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.

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

June 2012 Exam (Levels I, II, and III)

We offer three options for the CFA Program curriculum: eBook only

	by 21 September 11:59 p.m. ET	by 15 February 11:59 p.m. ET	by 14 March 11:59 p.m. ET
Program Enrollment (new Level I only)	$420	$420	$505
Exam Registration	$650	$745	$1,005
Curriculum eBook version	save $40	save $40	save $40
Total	Past deadline	$1,125 (#183,375)	$1,470 (#239,610)
Fees calculated at the rate of #163 to pounds, current rate will apply when paying.