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The CFA curriculum The curriculum for the CFA program is based on a Candidate Body of Knowledge established by CFA

Institute.[8] 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 including the HP 12C Platinum and the Texas Instruments BA II Plus including the BA II Plus Professional). 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.

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'...


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.)

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.


The Curriculum includes analyzing capital investment decisions (calculating NPV/IRR for projects), mergers and acquisitions, corporate governance, capital structure policy, and business and financial risk.

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.


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.


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, resultant asset allocation, order execution), and measurement of investment performance.

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 and Other Recognition The Society of Actuaries (SOA) granted the credit of Validation by Educational Experience (VEE)-Economics to the candidates who passed the CFA Level I exam. SOA also granted both the credits of VEE-Corporate Finance and VEE-Applied Statistical Methods to the candidates who passed the CFA Level II exam.[9]


New York Stock Exchange (NYSE) granted CFA charterholders the option to take only the portion of the Supervisory Analyst examination dealing with exchange rules on research standards and related matters.[10]

U.S. Securities and Exchange Commission (SEC) may grant exemption of the Series 86 testing requirements to financial analysts passing the CFA Level II examination who also meet other requirements of the NASD.[11]

U.S. American Institute of Certified Public Accountants (AICPA) granted CFA charterholders the option to satisfy the ABV examination requirements by passing the half-day Accredited in Business Valuation (ABV I) examination.

CFA charterholders are recognized by UK's Securities & Investment Institute (SII) as the equivalent level of SII full membership (MSI) or fellow membership (FSI).[12] Full membership of SII is recognized by several national investment professional bodies such as Hong Kong Securities Institute (HKSI) in Hong Kong.

Taiwan's Financial Supervisory Commission (FSC)[13] has approved the CFA designation with two-year practical working experience and passed the test of regulations of Securities Investment Trust & Consulting Enterprise and the test for common knowledge of finanacial markets and professional ethics, the common subjects, as equivalent to a local recognized industry qualification of Certified Securities Investment Analyst (CSIA) in Taiwan , after reviewed and approved by Securities Investment Trust & Consulting Association (SITCA)].[14]

The Academic and Accreditation Advisory Committee of Hong Kong's the Securities and Futures Commission (SFC) has approved the CFA designation as a recognized industry qualification for the licensing of Responsible Officers in Hong Kong.[15]

CFA charterholders who meet the competence requirement, which include both education training and work experience, may apply to register with the Hong Kong Business Valuation Forum (HKBVF) as Registered Business Valuer (RBV) in Hong Kong.[16]

CFA charterholders are recognized by HK's Hong Kong Securities Institutes(HKSI) as the equivalent level of HKSI full membership (MHKSI).[17]

CFA charterholders are recognized by PRMIA (Professional Risk Managers' International Association) as the equivalent of passing first two required exams.[18]

Exemptions are available for various modules in the South African Registered Persons Examination,[19] depending on the candidate's level. [20] No exemptions are available for the

examination on local market regulations and compliance. [edit]Trademark disputes INDIA - ICFAI university and AICTE vs CFAI CFA Institute is not affiliated with the Chartered Financial Analyst degree offered by the Institute of Chartered Financial Analysts of India (ICFAI) University of India or its affiliate, the Council of Chartered Financial Analysts (CCFA). In 1998, CFA Institute's predecessor organization, AIMR, sued and won a judgment against ICFAI/CCFA.[21] The judgment prohibited ICFAI/CCFA and its members from using the CFA or Chartered Financial Analyst mark in the United States and Canada. In August 2006, an Indian court issued a temporary injunction against the Indian organization as well.[22] The judgments made no assessment of the quality of the Indian program and merely discussed the trademark violation. The Indian Association of Investment Professionals is the only organization in India which is affiliated with CFA Institute.[23] CFA Institute trademark rights to the "CFA" and "Chartered Financial Analyst" brands have been recognized in India by the Delhi High Court. Further, the Delhi High Court issued an interim injunction ordering ICFAI and its affiliated Council of Chartered Financial Analysts to stop using CFA Institute trademarks. The Deputy Registrar of Trade Marks did recently determine that a trademark registration issued to CFA Institute for the "CFA" brand must be republished due to an error by the Trade Marks Registry. CFA Institute has numerous trademark applications on file with the Trade Marks Registry, and CFA charterholders from CFA Institute are free to use the "CFA" and "Chartered Financial Analyst" marks throughout India.[24] On May 8, 2007, the US District Court for the Eastern District of Virginia vacated a Default Judgment issued against ICFAI that CFA Institute obtained in October 1998. ICFAI recently moved to reopen the case and to vacate the Default Judgment because the Court lacked jurisdiction over ICFAI at the time the Default Judgment issued. With the default judgement vacated ICFAI informedIndian CFA Charter holders that they could legally use their Charter in the US and Canada. However, on September 4, 2007, the Court reversed its decision to vacate after a motion to reconsider that decision was

filed by CFA institute.[25][26] The latest update on the CFA Institute's legal battle in India can be found from the interview of Dr. Ashvin P. Vibhakar, Managing Director of the CFA Institute.[27] UNITED KINGDOM - Trade Marks Registry vs CFAI In January 2007, the Trade Marks Registry, UK refused to grant protection to the CFA trademark, as the word 'chartered' in the United Kingdom is associated with royal charters.[28]

CFA Level 1 - Ethics and Standards

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1.21 - Standard VI-A: Disclosure Of Conflicts

Standard VI contains three subsections:

Standard VI-A: Disclosure of Conflicts Standard VI-B: Priority of Transactions Standard VI-C: Referral Fees

Standard VI-A: Disclosure of Conflicts Members and Candidates must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to their clients, prospective clients and employer. Members and Candidates must ensure that such disclosures are prominent, are delivered in plain language, and communicate the relevant information effectively. Reasoning behind Standard VI-A As with the other Standards under Category IV, the primary intent of this Standard is to protect the employer. Full disclosure is a standard that is met with some resistance by those who wish to protect their privacy, but the principle recognizes the greater good that results from required disclosures. By extension, disclosing conflicts of interest protects clients and the public - indeed in Standard IV-B this same principle is revisited as it relates to relationships with clients and prospects. Devoting two separate Standards to the guideline shows that conflicts of interest are of vital concern to the investment industry, as they potentially impact the final three words of the Code of Ethics: "independent professional judgment". In the view of the CFA Institute, a beneficial ownership in stock of a company could potentially lead to bias in favor of that security, especially in larger firms where an influential portfolio manager can often move the market in favor of his or her personal holdings simply by recommending their purchase for client accounts or for a mutual fund he or she is managing. Conflict of interest guidelines crafted by compliance departments often seem excessive from the outside looking in, but these rule are more important than ever in today's environment, where the mere appearance of a conflict can be the basis for a lawsuit. Legal guidance tends to be

risk averse and works toward rules and regulations that aren't likely to be challenged by a court of law. There's little to be gained by arguing that "you are ethical and won't be unbiased" - these rules are crafted to provide a legal foundation so that everyone is subject to the same guidelines, and thus, faithful adherence to these rules must be followed. With regard to personal ownership of securities, note that the first part of this Standard simply requires disclosure to the employer of all securities owned. Based on this disclosure, and based on the activities of the firm, the company may issue additional restrictions that may limit personal trading in certain securities. The second part of the Standard states that for any internal directive that is imposed, the employee is fully obligated to honor what the employer is requiring. In other words, it is not simply breaking a company rule; it is also violating the Code and Standards and an individual would be liable to sanctions from both his or her firm's compliance department and the CFA Institute's Professional Standards and Policy Committee.

If the CFA Level 1 Exam presents a conflict of interest situation, it's usually worthwhile to pick out the choice that seems the most excessive in terms of disclosure and communication. Ignoring or failing to report something is almost certainly the wrong way to go!

Look Out!

Current versus Revised: Standards relating to Conflicts of Interest have been grouped together under their own Roman numeral (VI, Conflicts of Interest) for the first time - an indication of their importance to the profession. Traditionally, Standards have been organized in relation to the affected entity (Employer, Customer, Investing Public), but conflict of interest issues tend to affect all of these relationships.

Applying Standard VI-A Here are some problematic situations to be aware of when you are tested on this Standard on the exam:

The fact that a transaction is small and insignificant isn't a valid excuse for violating this Standard. An exam question might describe a situation in which an analyst bought only 10 shares of a stock that was on a company's restricted list, and tell you that he bought it for his 10-year-old daughter's college fund (exam situations often try to mask violations by making them seem innocent), but these details do not matter. Yes, buying 10 shares of a stock for a child's account has no material effect on one's ability to be unbiased. However, one must strictly adhere to the conflict of interest rules as they are established not only to prevent material conflicts, but also to avoid the appearance of a conflict, and to establish the legal foundation that these rules are universally enforced. Don't leave a decision on whether to report something to the discretion of the individual. When in doubt, report the relationships or the purchased securities to the compliance officer or other appropriate person, and allow the employer the chance to determine whether a conflict of interest exists in a particular situation. Immediate family members are generally subject to the same disclosure rules. If you come across a question dealing with this subject on the exam, don't answer that a person was not required to report a material position in a company simply because the stock was registered in his wife's name. That would be wrong. Disclose "quid pro quo" business relationships. For example, the Standards of Practice Handbook (pg. 54) gives the example of an advisor who was using a small broker/dealer for trades, even though that broker/dealer wasn't giving competitive prices - the relationship existed because the advisor was receiving referrals in return (a quid pro quo) and the broker/dealer was an old college friend. This scenario shows a failure to act in the client's best interests and is a violation of the Standard governing conflict of interest. An analyst is also a board director. Here's a summary of possible conflicts: Director Analyst

Duty owed to shareholders

Fiduciary duty to clients

Securities or options received as compensation

Recommendation will bid share price higher

Privy to material nonpublic information

Using material nonpublic information?

A small investment advisory firm is bought by a larger firm. The new relationship must be disclosed on any recommendations of the larger firm's securities. There's a change in the bonus incentive. A firm changes the way it compensates its portfolio managers, switching to an incentive plan where more of the emphasis is on short-term (one-year) performance numbers (relative outperformance). Earlier, the primary incentive was trailing five-year numbers. The new incentive represents a material change in how accounts are handled and must be disclosed to clients. An analyst puts out some favorable research. An analyst has options that will expire worthless unless the underlying stock price can rally in the next couple of months. The analyst writes up a buy recommendation on the stock to help ignite a rally. Is this action a violation? While the situation presents an obvious conflict of interest, the analyst is free to make such a recommendation, provided that (a) there is a reasonable and adequate basis and (b) there is disclosure of the ownership in the options and the fact that they are expiring.

On exam day, when you're presented with a situation and asked to evaluate whether it is truly a conflict of interest, ask whether that information seems material. Would a reasonable person view it as creating a potential bias? The Standard requires that you err on the side of caution - what seems trivial to one person (e.g. "I once worked at a broker/dealer, and 10 years ago we participated in an underwriting for preferred shares in this firm.") might mean quite a bit to another. How to Comply

Report beneficial interest in any security that could reasonably be considered to interfere with the individual responsibility to render unbiased opinions in one's day-to-day work. Report all such securities owned by one's immediate family, and any accounts (e.g. family trusts) over which one has investment discretion. Report all transactions for self and families. Report all outside relationships that might give the appearance of a conflict (e.g. board memberships, trustee positions). Obey all internal directives of a firm. Discuss conflict of interest questions with the compliance officer and the immediate supervisor (or legal counsel, if appropriate) prior to taking any action.

Case Study If a research analyst's wife serves on the board of directors of a company and the analyst writes a research report recommending purchase in those shares, such a relationship might create a particular bias in favor of that company and those shares. A client might read the research report and say, "Well, of course this guy likes the stock - his wife serves on the board of directors. He's probably just recommending it to support her." The client might view the wife's seat on the board as a factor that makes unbiased and objective reporting impossible. Even if the research is thorough, complete and fully supported, it's those material relationships - which create a conflict of interest in the eyes of some - that must be fully represented and fairly disclosed to the client pondering whether to act on the recommendation. To not disclose such information is regarded as unfair to the client and an ethical violation. Material Relationships Standard VI-A was created to address situations where there are material relationships associated with companies that are also the subject of research reports and investment recommendations. The sole requirement associated with this Standard is disclosure of the relationship - what sort of potential conflict does this person have? The disclosure should be made in plain language, in such a way that the essential information is conveyed to the client, who needs to know. For the case study above, placing the disclosure "An immediate family member sits on the board of directors" on the first page of the report would put the analyst in compliance with the Standard. Disclosing that it's the analyst's wife might carry even more meaning, but the analyst also has a right to privacy and "immediate family member" is all that is required by the Standard. The Standard applies most particularly to situations where an analyst recommends the stock and also retains a personal investment position in the shares. Some people might view this type of conflict in a positive light - as "the analyst likes it enough to own it". Important relationships that require disclosure include, but are not limited to, the following:

Immediate family circumstances (e.g. spouse employed there) Filed Under: Chartered Financial Analyst - CFA, Professional Education

Material beneficial ownership of securities (self or immediate family) Underwriting relationships between the company and the analyst's firm Broker/dealer relationships (e.g. whether this broker makes a market in the stock) Board of directors, retained as a consultant, etc.

1.22 - Standard VI-B: Priority Of Transaction

Investment transactions for clients and employers must have priority over investment transactions in which a Member or Candidate is the beneficial owner.

Reasoning behind Standard VI-B This Standard addresses the personal investing of those in the investment profession and establishes that there must be a certain hierarchy of interests in order to maintain the public trust: first client and employer interests, then personal interests. The underlying principles of the Standard are directed to those individuals who are in a position to have acquired advance knowledge of pending activity by their employer. Lacking any

standards or guidance, these individuals are likely to consider their own self-interest and trade for themselves ahead of any pending activity. In some cases (e.g. a small, independent advisor), the impact of this pending activity is probably negligible. In other cases (e.g. a major Wall Street brokerage changes a recommendation), such announcements can be a significant factor in driving the price of the security. In either case, front running transactions is considered unethical behavior - and not necessarily because of any potential positive or negative impact on the stock. Front running is prohibited because of the importance of the duty of loyalty that investment professionals owe to their clients, and the fact that this duty is compromised whenever professionals place their personal interests before those of their clients. The issue of personal investing continues to be debated by the members of the CFA Institute. Many have suggested that the most sensible way to resolve the issue - and address the public's perception that self-interest guides the behavior of investment professionals - is to prohibit all personal investing by active practitioners. Such a ban would eliminate the need to scrutinize everyone's personal activities for potential conflicts of interest. At the same time, such an extreme measure would likely prompt many talented individuals to leave the investment business and would discourage others from ever entering, which would hurt the average investor in a broader sense. So, as it stands today, investment personnel are not completely banned from personal investing. However, the CFA Institute has adopted a series of recommended guidelines, including a ban on participation in IPOs and strict limits on acquiring securities in private placements. While these are not yet required, they are designed to address areas of conflict and reinforce a culture that will restrain blind self-interest in these matters. Personal transactions include any activity in the following:

A member's own account Accounts of family members, including spouse and children (and this includes personal transactions "hidden" in an account carrying one's wife's maiden name) Direct or indirect pecuniary interest - which might include trust or retirement accounts

Applying Standard VI-B The intent of this Standard on priority of transactions is to ensure fairness and avoid conflicts of interest. When you encounter these situations in an exam question, start by asking whether a standard of fairness has been applied. Allowing preferential treatment for oneself or one's family members is obviously a violation, but less obvious are situations where the Standard has been misinterpreted or excessively applied. The following are some of the more common situations that test whether the Standard has been violated:

Initiating or Changing a Recommendation - In a case where an analyst wishes to change a recommendation on a security, it is a violation of this Standard to withhold the change until a personal transaction is completed. To be in compliance, the analyst would need to first announce the change and then allow time for the information to be disseminated, and only then could he or she act on his or her personal behalf in an account regarded as a personal account. If an analyst wishes to recommend a stock but temporarily withholds the idea so he or she can buy for a personal account, he or she will be in violation of Standard VI-B because he or she will be attempting to personally benefit from information or knowledge he or she acquired, rather than practice a duty of loyalty and permit clients to benefit first. Family Account at a Disadvantage - Take a situation where an analyst has access to an IPO and private placement shares from time to time. His parents' retirement account and the college trust funds of his three nieces and two nephews are under the custody of his firm and are under his full discretion to manage. This analyst is familiar with the CFA Code and Standards and is concerned about showing any favoritism in accounts where he believes he might be perceived as having an indirect pecuniary interest. Therefore, when IPO shares are available for him to allocate, he excludes his personal accounts, as well as those of his parents and other relatives, and distributes those shares on a systematic pro rata basis to all other portfolios. Only when remaining shares are available does he include any relatives' accounts. In this case, even though the analyst may have been trying to do the right thing, he has misinterpreted the Standard and violated it. He has a fiduciary duty to manage in the best interests of all accounts, including those of his parents, nieces and nephews, and they are entitled to the same treatment as all other accounts, since they are also fee-paying clients of his firm. Boss's Account - A portfolio manager is given occasional access to IPO shares. Following her firm's allocation guidelines, she distributes hot IPOs based on a random draw of those accounts that have shown interest. Not every account is able to participate every time, given the relatively modest number of IPO shares available to her. However, as a rule, she always includes her boss's account (which she also manages). This account does not meet the definition of beneficial ownership as established by Standard VIB, and she has no direct or indirect pecuniary interest. However, she has misinterpreted the Standard and is in violation. The intent of the Standards is to remove any degree of favoritism and ensure that all clients are treated fairly. Her boss was given automatic priority ahead of other accounts - moreover, even without a pecuniary interest, the portfolio manager has a vested interest in having this account perform well. Institutional Buying - The relationship between the research and trading functions of a large organization is often tested for proper conduct. Has the firm established a blackout/restricted period between the announcement of a new or changed recommendation and the execution of trade orders? Keep in mind that while Standard VI-B does not specifically require a blackout period, it includes the language "adequate opportunity to act on the recommendation" to encourage firms to establish such guidelines. If an exam question presents a case in which a trader acted immediately on a recommendation (within minutes, for example, or any time that same day), that action is likely to be judged a violation as clients were not given a proper chance to react.

How to Comply The following issues and ideas should be addressed when considering Standard VI-B:

What Is a Beneficial Owner? Beyond the minimum definition provided by the Standard, sensitive circumstances may call for stricter guidelines.

What Is an Investment? The Standard (and situations addressing the Standard) tends to focus on stocks, bonds and derivative securities, but if a firm invests in real estate, collectibles or currency (for example), it would need to regulate those transactions. Implement Firewalls - A firewall is designed to protect sensitive information by preventing its dissemination from one group to another. A large, diverse organization needs to adopt firewalls in certain cases - for example, between trading and research, to prevent a violation of front running prior to disclosing a recommendation. Limit Access to Persons - The more people there are with access to sensitive information, the more likely it is that information will leak out. By limiting the number of people who have access to material nonpublic information, information can be protected and violations minimized. Be Clear about Prohibited Transactions - Given the scope of a firm and its particular obligations to clients, it may choose to restrict trading in certain securities. For example, a restricted list may be compiled that prohibits trading in companies that have engaged that firm in a business relationship (perhaps as an underwriter). The CFA Institute has recommended (but not absolutely required) that participation in equity IPOs be restricted for a firm's employees in favor of client needs. Some firms have adopted those guidelines. Whatever is prohibited or restricted needs to be clearly communicated to all employees to ensure compliance. Use Blackout/Restricted Periods - As there are so many unique factors, the guiding principle should involve what is best for clients. For example, at a large firm, a total ban on trading for two business days following the dissemination of a new or changed recommendation may be the most appropriate course of action. For small firms, the guidelines may allow trades at any point following the completion of client trades. Report Personal Transactions - Typically, employees should report all transactions on a quarterly basis, though individuals with particularly sensitive responsibilities may need to report more frequently. Sending duplicate copies of confirmations and statements to the internal compliance officer is a worthwhile exercise, as it allows timelier discovery of inappropriate activity. Enforce Prior Clearance of Personal Transactions - A process that requires pre-approval of personal transactions is a good way to prevent a violation from occurring in the first place. Disgorge Trades Made in Violation - While procedures should be designed to prevent violations, it is also worthwhile to establish guidelines on how to proceed when violations occur. When a trade is made in violation of company policy, a request can be made to break the trade as soon as possible, completely reversing the transaction, with any resulting profits distributed in some manner that does not benefit the individual or the firm.

Establish Disciplinary Procedures - Establish a process for internal investigations, and determine how compliance procedures will be enforced. Filed Under: Chartered Financial Analyst - CFA, Professional Education

Level I is 100% objective type, i.e. multiple choice (1.5 minutes per question, total of 240 questions in 6 hours). Level II is 100% item set (short case study, each case has 6 questions and 10 cases per session). Level III is 50% item set and 50% essay type. Program Agenda Weekend 1 : Corporate Finance Weekend 2 : Financial Statement Analysis Weekend 3 : Economics Weekend 4 Financial Statement Analysis Weekend 5: Fixed Income Investments Weekend 6: Economics Weekend 7: Financial Statement Analysis Weekend 8 Fixed Income Investments Weekend 9: Portfolio Management Weekend 10: Financial Statement Analysis Weekend 11: Equity Securities Weekend 12: Derivatives Weekend 13: Alternate Investments Weekend 14: Quantitative Analysis Weekend 15: Quantitative Analysis Weekend 16: Ethics