Transcript CFA Program Overview

CFA Institute and CFA Centre:
An Overview
John Barrass
Head, Europe, Middle East, and Africa
CFA Centre for Financial Market Integrity
CFA Institute
South Africa, October 2006
CFA Institute
Who We Are: Non-Profit Professional Association of 86,000 investment
professionals worldwide.
Ethical Leadership: Code of Ethics and Standards of Professional Conduct
Quality Education for Investment Professionals: CFA
Global Investment Performance Standards (GIPS)
CFA Centre for Financial Market Integrity
CFA Institute Mission: To lead the investment profession globally by setting
the highest standards of ethics, education, and professional excellence.
CFA Centre Mission: To be a leading voice for fairness, efficiency, and
investor protection in global capital markets.
The CFA® Programme
A self-study, distance learning-based programme that
takes a generalist approach to security analysis and
portfolio management and emphasises the highest ethical
and professional standards.
CFA Institute
134 Member Societies, 55 Nations,
4 Offices, 86,000 members
Canada:
12 Societies
United States:
70 Societies
Argentina & Uruguay
Bahamas
Barbados
Brazil
Cayman Islands
Mexico
Trinidad & Tobago
32 EMEA Societies
Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
Finland
France
Germany
Hellenic
Hungary
Ireland
Italy
Luxembourg
Netherlands
Bahrain
Bermuda
Egypt
Jordan
Lebanon
Mauritius
Poland
Romania
Russia
Spain
Sweden
Switzerland
Turkey
United Kingdom
Saudi Arabia
South Africa
United Arab Emirates
Australia
(Sydney & Melbourne)
Hong Kong
Indonesia
Japan
Korea
Malaysia
New Zealand
Pakistan
Philippines (Manila)
Singapore
Sri Lanka
Thailand
Offices in USA, UK (EMEA), Hong Kong (Asia)
CFA Institute
CFA Institute: Core Values
Values:
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Integrity
Professional Excellence
Volunteer Service
Strength of Community & Cooperation
CFA Institute
CFA Institute: Range of Activities
 Society, Member and Candidate Services
 CFA Centre for Financial Market Integrity: Professional
Standard Setting, Ethics and Standards of Professional
Conduct, Advocacy
 CFA Educational Programme and Examination
 Educational Products, Events, Publications
 Continuing Professional Development Programme
(voluntary)
 Public Relations/Media Awareness
 Employer and University Outreach: University
Partnerships
 Internal (Finance, Legal)
CFA Institute
CFA Institute Code of Ethics
CFA Institute Members 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 themselves 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.
CFA Institute
CFA Centre Policy Groups
Research & Policy
Formulation
Standards
of Practice
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•Code of Ethics &
Standards of Conduct
•Asset Manager Code
•Soft Dollar Standards
•Research Objectivity
•Trade Management
Investment
Performance
Capital Markets
Policy
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•AIMR-PPS®
•Global Investment
Performance
Standards - GIPS®
•Market Regulation
•Corporate Disclosure
& Governance
•Financial Accounting
& Auditing Standards
•Self-Regulatory Orgs
CFA Institute
CFA Centre Staff Structure
Kurt Schacht, CFA – Managing Director
Research & Policy Formulation
Global Outreach & Advocacy
Jonathan Boersma, CFA
John Barrass
Director – Standards of Practice
Head – CFA Centre for Europe,
Middle East, & Africa
Alecia Licata
Lee Kha Loon, CFA
Director – Investment
Performance Standards
Head – CFA Centre for Asia
Pacific
Rebecca McEnally, CFA
Society & Member Relations
Director – Capital Markets Policy
Bob Luck, CFA
Director – Society & Member
Relations
CFA Institute
CFA Centre Advocacy
 Volunteer Committees
 Global in scope
 Regional rather than national focus when
commenting
 Mainly USA and Europe (Washington, Brussels)
 Wide range of subjects, depending on region and
members’ interests
 Corporate Disclosure issues, especially international
accounting standards, a speciality historically
 Capital Markets issues the other high priority,
including performance measurement
CFA Institute
CFA Centre: Professional Standards
(a selection)
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Standards of Practice Handbook
Code of Ethics and Standards of Professional Conduct
Soft Dollar Standards (1999) (will be revised)
Trade Management Guidelines (2002)
Research Objectivity Standards (for equity analysts)
Global Investment Performance Standards (GIPS®: 25
countries, of which 18 are in EMEA)
Asset Manager Code (2005)
IFRSs: CFA Centre involvement in work of IASB
Analyst/Corporate Relations Guidelines (with NIRI)
Corporate Governance Manual for Investors (2005)
Comprehensive Business Reporting Model (2006)
Short-Termism Report 2006
CFA Institute
Speaking Out on Issues
The CFA Centre Comments in Asia, EMEA,
& North America On:
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-Analyst Retaliation
-Financial Reporting
-Soft $ / Soft Commissions
-Sarbanes Oxley
-Analyst Standards
-Financial Market Regulation
-Investment Performance Stds
-Option Expensing
-Corporate Governance
-Hedge Fund Regulations
-Asset Manager Code of Conduct
-Majority Director Voting
-Investor Protection
CFA Institute
Standards for Our Members
CFA Institute
Standards for the World
 Global Investment Performance
Standards (GIPS®)
 Convergence of many national
standards including AIMR-PPS
into one global standard.
 Providing consistent performance
measurement and reporting for
investors worldwide.
 An alliance of experts from a
variety of fields within the global
investment industry.
CFA Institute
Educating Investors
 Reasons for the Manual:
 Corporate governance scandals
have resulted in huge investor
losses.
 Studies show that returns are
linked to governance.
 Investors needed a guide to
help them:
– Recognize the risks,
– Understand their
implications, and
– Know where to find
relevant information.
CFA Institute
Thought Leadership
 Twelve Principles Including:
 Reporting from Investor
Perspective.
 Reflect Fair Value, Not Historic
Cost.
 All Changes in Net Assets on
One New Statement.
 Require Direct Method Cash
Flow.
CFA Institute
Short Termism Project
 Blue Ribbon Panel Meetings
 Meetings with corporate issuers, analysts, asset
managers, institutional investors led to
recommendations in 5 areas:
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Earnings Guidance Reform
Incentives
Leadership
Communications & Transparency
Education
CFA Institute
Financial Market Integrity Index
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Index of Member Sentiment
 Focus on trends in member sentiment over time
 Aggregate opinions of CFA members worldwide
 Major Financial markets covered
 Questions measured on five point scale
 Twice yearly survey resulting in comparative scores
 Twice yearly reports with comments behind scores
 Members will rate ethical behaviour of:
– Buyside, sellside, corporate boards, management,
investment bankers, hedge fund and private equity
professionals
 Members will also assess:
– Corporate Governance, legal protection of shareholders,
financial transparency
CFA Institute
Self Regulatory Organisations
 Regulation and Roles of Self-Regulation
 Optimum role of government in market regulation
 Conflicts between markets and regulators
 Continued Viability of SROs
 Characteristics of successful regulatory systems
 Duplicative rules & regs, overlapping jurisdictions & sectors
 Risk of regulatory arbitrage – race to the bottom.
 Globalisation and Consolidation of Markets
 Movement towards global market/regulator
 Cross-border mergers & conflicts between regulators
 Demutualisation of Markets
 Primary conflicts between for-profit exchanges & regulators
 Implications for shareholders vs. investor interests
CFA Institute
Pension Fund Trustee Code
Conduct of Pension Fund Trustees
 Conflicts of interest
 Competence
 Due Diligence
 Fiduciary Duty & Delegation
 Personal Travel and Gifts
CFA Institute
Working Together
Cooperation Across Divisions at CFA Institute
 P&PD = Publications & Conferences
 Society Services = Society Presentations &
Programmes
 CFA & CIPM Programs = Curriculum Content
 Marketing & Communications = Employer Outreach,
Public Awareness, & Media Relations
 All Other Divisions = Key Support and Services
CFA Institute
CHARTERED FINANCIAL ANALYST®:
Key Features
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Rigorous Self-Study Programme – flexible hours, no compulsory
course attendance
Practical and relevant learning tied to current work
requirements (questionnaires, job analysis, CCC)
Wide ranging body of knowledge; degree before starting; 3
levels
Global passport: same exam and language everywhere (COE)
Universal, tightly controlled, marking and grading (600 +
charterholders)
Difficult to pass (low percentages): Europe has best average
results for Level III
Full charter requirements include work experience, annual
professional conduct statement, membership (of local society)
as well as CFA at all 3 levels
Affordable price
CFA Institute
The CFA® Programme
COE
CCC
EXAMINATIONS
EXAMINATION
CURRICULUM
ADMINISTRATION
BODY OF
KNOWLEDGE
PRACTICE ANALYSIS
GRADING
Practitioners at
every step of
the process
MINIMUM PASSING
SCORE (MPS) CFA INSTITUTE
GOVERNORS
CFA Institute
Practice Analysis: What and
Why?
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Most respected authorities in education, testing and certification
recommend or require periodic practice analysis studies
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Focuses on the critical tasks performed by competent people
working in the profession
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Establishes content validity – curriculum and exams must be linked
to the knowledge and skills needed by practitioners
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Results in new CBOK – the blueprint for curriculum and exam
content
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The only way a topic gets into the CFA Programme (and eventually
tested) is if practitioners throughout the world deem it important.
CFA Institute
Locations of Practice Analysis
Panels
New York
Boston
Chicago
San Francisco
Los Angeles
Washington,
D.C.
 Toronto
 Montreal
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London
Zurich
Milan
Frankfurt
Tokyo
Hong Kong
Shanghai
Singapore
Sydney
Melbourne
Note: Members of Brazil and South Africa CFA Institute
Societies were also asked to review/comment on CBOK (via
email)
CFA Institute
Body of Knowledge
Ethical and Professional Standards
 Quantitative Methods
 Economics
 Financial Statement Analysis
 Corporate Finance
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Analysis of Equity Investments
Analysis of Debt Investments
Analysis of Derivatives
Analysis of Alternative Investments
 Portfolio Management and
Performance Presentation
Investment
Tools
Asset
Valuation
Portfolio
Management
CFA Institute
Curriculum
Developed by Candidate Curriculum Committee (CCC); 150
people involved from all over the world; extensive review;
each level 17 to 20 study sessions in CFA Instituteproduced study guides
Study Guide
Topic Focus
Learning Focus
Level I
Investment
Tools
Asset
Valuation
Knowledge
and Ethical Stds.
Application
and Ethical Stds.
Portfolio
Management
Synthesis and
Ethical Stds.
Level II
Level III
CFA Institute
Curriculum
5%
15%
10% 10%
10%
5%
30%
40%
40%
50%
35%
50%
LEVEL I
Professional Standards
Investment Tools
Asset Valuation
Portfolio Management
LEVEL II
Professional Standards
Investment Tools
Asset Valuation
Portfolio Management
LEVEL III
Professional Standards
Investment Tools
Asset Valuation
Portfolio Management
Percentages are approximations of the actual topic weights for
exam purposes. Actual content of future exams may vary.
CFA Institute
Curriculum
 Each study session is designed for flexible, selfdirected study
 Readings are drawn from a variety of materials,
both CFA Institute and other
 Each reading has learning outcome statements
(LOS): “The candidate should be able to…”
CFA Institute
Curriculum
 Each LOS has one or more command words,
which indicate type of learning expected:
“discuss, calculate, contrast”
 LOS are NOT an exact proxy for examination
questions, but mastering LOS is the best study
approach
 CFA Institute increasingly developing and publishing
own curriculum to meet unique needs
CFA Institute
Preparatory Courses and Materials
 Candidates should only use preparatory courses and
materials as supplements to the CFA Institute
prescribed curriculum
 CFA Institute does not review or warrant the accuracy
of any preparatory materials
 Preparation is the key to success on the examinations
– there are no shortcuts to success
CFA Institute
Examinations
Developed by Council of Examiners (COE), consultants,
staff; driven by LOS; over 80 people involved from all
over the world; extensive reviews; each exam 6 hours in
length
Exam
Topics
Format
Level I
All topics
Multiple choice
Level II All topics
Level III Portfolio Management 
Other topics
Item sets—100%
Essays—50%
Item sets—50%
CFA Institute
Examinations
 Multiple choice: stand alone individual multiple
choice questions; 1 question = 1.5 minutes, exam =
240 questions = 360 points
 Essay: discussion-type and problem solving
questions; ½ exam = typically 10-18 questions
with variable minutes = 180 points
 Item set: vignette with set of accompanying related
multiple choice questions (items); 1 question = 3
minutes, 1 item set = 6 questions, ½ exam = 10 item
sets = 180 points
CFA Institute
Examination Development
 CFA Institute offers on-line sample examinations for
Level I, Level II and Level III (item set only)
 Length reflective of live examination (3 hours)
 Timed, with immediate feedback
 Developed utilizing same process as live
examination
 Modest fee of $50
CFA Institute
Minimum Passing Score
MPS for each level established by CFA
Institute Board of Governors
Multiple inputs (standard setting,
candidate performance statistics, quality of
candidate responses, etc.) used to set the
MPS
Passing rate for each level is a residual
determined by each level’s MPS
CFA Institute
CFA: Employers’ Attitudes
 An increasing number of employers worldwide are
requiring the CFA charter (or at least participation in the
programme) for hiring and promotion.
 An increasing number of employers worldwide are
substituting the CFA charter for graduate degrees when
establishing job specifications.
CFA Institute
Employers of Charterholders
CFA Institute
CFA® Charterholders and
Candidates
There are currently about 10,000 active charterholders in
EMEA (13,000 CFA Institute members) and 71,000 active
charterholders worldwide. The EMEA charterholder numbers
are increasing at over 1,500 a year.
In the academic year 2005/06, approaching 20,000 CFA
candidates enrolled in EMEA for the CFA examinations, and over
116,000 candidates worldwide. December results for 2006/07
imply that this figure could be exceeded this year.
CFA Institute
Percent Pass
Combined Pass Rates 1963-2005
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003
Year
CFA Institute
June 2006 Exams
 Over 84,000 candidates enrolled from 145 countries/territories
 1,235 in South Africa
 186 exam sites in 86 countries/territories worldwide
 Pass rates 2005
 36% at Level I
 56% at Level II
 55% at Level III
 Combined (weighted average) pass rate was 48%
 Better this year
Results are available online and by mail
 Level I: Late July and Early January
 Level II and III: Mid-August
CFA Institute
CFA® Charter Requirements
Sequentially pass Level I, II, and III exams
Have 4 years of professional experience
Provide professional references (Level III)
Submit professional conduct statement
Apply for membership in CFA Institute
and a local analysts’ society
CFA Institute
CFA® Programme Costs
Estimated Basic Costs for Level I (all amounts GBP)
•Registration Fee to Enter CFA® Programme
•Enrollment Fee for Level I Examination
Required Fees
£215
£255
£470*
•Study Materials for Level I:
Modular Curriculum Package
£245
Approximate Total Costs for Level I
£715
*Assumes Registration and Enrollment received by 16 February 2007
CFA Institute
Take your CFA Charter to the
Bank…
€ 175,000
The CFA Premium = € 35,000
CFA
Charter
holders
Median Total
Compensation for CFA
Institute Members with
10+ Years Experience
2003 Compensation
Survey
€140,000
Noncharter
holders
CFA Institute
Contact Information
Information Central, Europe
CFA Institute, 10th Floor, One Canada Square
Canary Wharf, London E14 5AB, United Kingdom
Telephone:
+44 (0) 20 7531 0751
Fax:
+44 (0) 20 7531 0767
E-mail:
[email protected]
John Barrass
Telephone:
E-mail:
+44 (0) 20 7531 0761
[email protected]
www.cfainstitute.org
Click on “CFA Program”
Ann Marie Wood
CFA South Africa
P O Box 131, Ferndale
2160 South Africa
Tel: +27 011 791 0105
Fax: +27 011 791 0107
Email: [email protected]
CFA Institute