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
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® ProgrammeA 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
AustriaBelgiumBulgariaCyprusCzech RepublicDenmarkFinlandFrance
PolandRomaniaRussiaSpainSwedenSwitzerlandTurkey United Kingdom
Australia (Sydney & Melbourne)Hong KongIndonesiaJapanKoreaMalaysiaNew ZealandPakistanPhilippines (Manila)SingaporeSri LankaThailand
Saudi ArabiaSouth AfricaUnited Arab Emirates
BahrainBermudaEgyptJordanLebanonMauritius
Argentina & UruguayBahamasBarbadosBrazilCayman IslandsMexicoTrinidad & Tobago
United States:70 Societies
Canada: 12 Societies
32 EMEA Societies
Offices in USA, UK (EMEA), Hong Kong (Asia)
GermanyHellenicHungaryIrelandItalyLuxembourgNetherlands
CFA Institute
Values:
Integrity Professional Excellence Volunteer Service Strength of Community & Cooperation
CFA Institute: Core Values
CFA Institute
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: Range of Activities
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
Standardsof Practice--------------------------------------------------
•Code of Ethics & Standards of Conduct•Asset Manager Code•Soft Dollar Standards•Research Objectivity•Trade Management
InvestmentPerformance-----------------------------------------------
•AIMR-PPS®•Global Investment Performance Standards - GIPS®
Capital MarketsPolicy------------------------------------------------
•Market Regulation•Corporate Disclosure & Governance•Financial Accounting & Auditing Standards•Self-Regulatory Orgs
CFA Institute
CFA Centre Staff Structure
Research & Policy Formulation
Jonathan Boersma, CFADirector – Standards of Practice
Kurt Schacht, CFA – Managing Director
Alecia Licata Director – Investment
Performance Standards
Rebecca McEnally, CFA
Director – Capital Markets Policy
John Barrass Head – CFA Centre for Europe,
Middle East, & Africa
Lee Kha Loon, CFA Head – CFA Centre for Asia
Pacific
Bob Luck, CFA Director – Society & Member
Relations
Global Outreach & Advocacy
Society & Member Relations
CFA Institute
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 Centre Advocacy
CFA Institute
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 Centre: Professional Standards (a selection)
CFA Institute
Speaking Out on Issues
The CFA Centre Comments in Asia, EMEA,
& North America On:
-Analyst Retaliation -Option Expensing -Financial Reporting -Corporate Governance -Soft $ / Soft Commissions -Hedge Fund Regulations -Sarbanes Oxley -Asset Manager Code of
Conduct -Analyst Standards -Majority Director Voting -Financial Market Regulation -Investor Protection -Investment Performance Stds
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 MeetingsMeetings with corporate issuers, analysts, asset
managers, institutional investors led to recommendations in 5 areas:– Earnings Guidance Reform– Incentives– Leadership– Communications & Transparency– Education
CFA Institute
Financial Market Integrity Index
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
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
CHARTERED FINANCIAL ANALYST®: Key Features
CFA Institute
The CFA® Programme
EXAMINATIONS
CURRICULUM
BODY OF KNOWLEDGE
PRACTICE ANALYSIS
GRADING
MINIMUM PASSINGSCORE (MPS) -CFA INSTITUTE GOVERNORS
CCC
COE
Practitioners at every step of the process
EXAMINATIONADMINISTRATION
CFA Institute
Practice Analysis: What and Why?
Most respected authorities in education, testing and certification recommend or require periodic practice analysis studies
Focuses on the critical tasks performed by competent people working in the profession
Establishes content validity – curriculum and exams must be linked to the knowledge and skills needed by practitioners
Results in new CBOK – the blueprint for curriculum and exam content
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
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
Portfolio Management and Performance Presentation
Investment Tools
Asset Valuation
Portfolio Management
Ethical and Professional Standards Quantitative Methods Economics Financial Statement Analysis Corporate Finance
Analysis of Equity Investments Analysis of Debt Investments Analysis of Derivatives Analysis of Alternative Investments
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 Institute-produced study guides
Study Guide Topic Focus Learning Focus
Level I Investment Knowledge Tools
and Ethical Stds. Level II Asset Application Valuation
and Ethical Stds. Level III Portfolio Synthesis and Management
Ethical Stds.
CFA Institute
Curriculum
Percentages are approximations of the actual topic weights for exam purposes. Actual content of future exams may vary.
LEVEL I
50%
15%5%
30%
Professional StandardsInvestment ToolsAsset ValuationPortfolio Management
LEVEL II
40%
10%10%
40%
Professional StandardsInvestment ToolsAsset ValuationPortfolio Management
LEVEL III
50%
5%
35%
10%
Professional StandardsInvestment ToolsAsset ValuationPortfolio Management
CFA Institute
Curriculum
Each reading has learning outcome statements (LOS): “The candidate should be able to…”
Each study session is designed for flexible, self-directed study
Readings are drawn from a variety of materials, both CFA Institute and other
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 Item sets—100% Level III Portfolio Management Essays—50% Other topics Item sets—50%
CFA Institute
Examinations
Essay: discussion-type and problem solving questions; ½ exam = typically 10-18 questions with variable minutes = 180 points
Multiple choice: stand alone individual multiple choice questions; 1 question = 1.5 minutes, exam = 240 questions = 360 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
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: Employers’ Attitudes
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
0.000.100.200.300.400.500.600.700.800.901.00
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003
Year
Per
cen
t P
ass
Combined Pass Rates 1963-2005
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
Estimated Basic Costs for Level I (all amounts GBP)
*Assumes Registration and Enrollment received by 16 February 2007
CFA® Programme Costs
•Registration Fee to Enter CFA® Programme £215•Enrollment Fee for Level I Examination £255
Required Fees £470*
•Study Materials for Level I:Modular Curriculum Package £245
Approximate Total Costs for Level I £715
CFA Institute
Take your CFA Charter to theBank…
Non- charter holders
€140,000
€ 175,000
CFA Charter holders
The CFA Premium = € 35,000
Median Total Compensation for CFA Institute Members with 10+ Years Experience 2003 Compensation Survey
CFA Institute
Contact Information
Information Central, EuropeCFA Institute, 10th Floor, One Canada SquareCanary Wharf, London E14 5AB, United Kingdom
Telephone: +44 (0) 20 7531 0751Fax: +44 (0) 20 7531 0767
E-mail: [email protected] www.cfainstitute.orgClick on “CFA Program”
John BarrassTelephone: +44 (0) 20 7531 0761E-mail: [email protected]
Ann Marie Wood CFA South AfricaP O Box 131, Ferndale2160 South AfricaTel: +27 011 791 0105Fax: +27 011 791 0107Email: [email protected]