Chartered Financial Analyst

Chartered Financial Analyst
Chartered Financial Analyst(CFA)
Type Professional Organization
Location Charlottesville, Virginia, United States
Cfa logo.gif

The Chartered Financial Analyst (CFA) Program is a graduate level self-study program offered by the CFA Institute (formerly AIMR) to investment and financial professionals.[1] A candidate who successfully completes the program and meets other professional requirements is awarded a "CFA charter" and becomes a "CFA charterholder." To become a charterholder a candidate must satisfy the following requirements. [2]

• Complete the CFA Program (mastery of the current CFA curriculum and passing a series of three six hour examinations)
• Possess a bachelor's degree (or equivalent) from an accredited institution
• Have four years (48 months) of qualified work experience (or a combination of education and work experience acceptable by the CFA Institute)
• 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.[3]


The CFA designation

The CFA charter 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. Additionally, the CFA charter has experienced increasing relevance and demand within corporate finance.

The CFA designation was first awarded in 1963. [4] As of August 2010, CFA Institute has more than 100,000 members around the world, including more than 90,000 CFA charterholders. [4]


The predecessor of CFA Institute, the Financial Analysts Federation (FAF), was 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 exams 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 to 2006 with increases of 25% and 53% respectively in the total number of charterholders.[5]


Year Level 1 Level 2 Level 3
2011 39%/NA 43% 51%
2010 38%/36% 39% 46%
2009 46%/34% 41% 49%
2008 35% 46% 53%
2007 39% 40% 50%
2006 40% 48% 76%
2005 35% 56% 55%
2004 35% 32% 64%
2003 41% 47% 68%
2002 44% 47% 58%
Weighted Mean 39.7% 44% 57.7%

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, as discussed below.[6]

Candidates generally 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. Exams are challenging, with only 38% passing the Level I, 39% passing Level II, and 46% passing Level III exam in June 2010.[7][8] In December 2010, the CFA exam pass rate for Level I was 36% [9] It should be noted that level 2 and 3 pass rates apply to candidates that must have already passed the prior level. 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%. Additionally, 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[4] 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.


Average compensation for CFA charterholders located in the U.S. was reported as $184,000 in base salary, and $304,000 in total compensation, based on 2001 survey data[dubious ]. Total compensation rises to $384,000 for charter holders with 10 years experience, and compensation at the 90th percentile exceeded $1,000,000..


2012 Level III CFA Program Curriculum

The CFA curriculum provided by the CFA Institute is the longest and most primary resource for the CFA examinations. Third-party curricula are available from numerous commercial learning providers, although are not officially endorsed.

The CFA examination requires rigorous preparation and significant practice. Test takers may use this free online test to prepare for the CFA Exam.


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 of Ethics and Standards of Professional Conduct".

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 - and portfolio-related calculations.


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.

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, 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.

Curriculum and CFA-approved university programs

CFA also has a list of accredited education partners who provide relevant courses and CFA education preparation. There are 57 partners in the USA, 33 partners in Asia Pacific and 47 partners in EMEA [10]

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

Legal 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.[11]
  • 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.[12]
  • 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.[13]
  • CFA charterholders are recognized by UK's Securities & Investment Institute (SII) as the equivalent level of SII full membership (MSI) or fellow membership (FSI).[14] 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)[15] 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 financial 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)].[16]
  • 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.[17]
  • 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.[18]
  • CFA charterholders are recognized by HK's Hong Kong Securities Institute (HKSI) as the equivalent level of HKSI full membership (MHKSI).[19]
  • CFA charterholders are recognized by Professional Risk Managers' International Association (PRMIA) as the equivalent of passing first two required exams.[20]
  • Exemptions are available for various modules in the South African Registered Persons Examination,[21] depending on the candidate's level. [22] No exemptions are available for the examination on local market regulations and compliance.

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.[23] 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.[24] 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.[25] 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 because of 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.[26] 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 informed Indian 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.[27][28] 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.[29]

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.[30]

See also

Reference links to notable sources

The CFA Charter, exam standards, and public complaint system are disclosed on the U.S. Financial Industry Regulatory Authority (FINRA) education website where the CFA Chartered Financial Analyst program is shown on the FINRA guide to designations. [31]

CFA is also shown on the Investopedia List of Designations as a premier qualification. [32]

The CFA requirements are also documented on the Wall Street Journal and documentation of standards and financial designations which also disclosed FINRA monitored designations. [33]



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  7. ^ "52 Percent of 63,249 Candidates Worldwide Passed June 2006 Exams For Investment Industry's Highly Regarded CFA Program". Archived from the original on May 24, 2007. Retrieved 2010-03-23. 
  8. ^ "39 Percent of 37,573 Candidates Worldwide Passed December 2007 Level I CFA Exam". 2008-01-23. Archived from the original on February 29, 2008. Retrieved 2010-03-23. 
  9. ^ "CFA Exam Results". 
  10. ^ "CFA List of Registered Curriculums and Educational Programs". 
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  18. ^ "Hong Kong Business Valuation Forum". 2005-09-29. Retrieved 2010-03-23. 
  19. ^ "Welcome to Hong Kong Securities Institute". Retrieved 2010-03-23. 
  20. ^ "Professional Risk Managers' International Association". PRMIA. Retrieved 2010-03-23. 
  21. ^ "The South African Institute of Financial Markets: Registered Persons Examination". Retrieved 2010-03-23. 
  22. ^ "Registered Persons Examination Exemptions". Retrieved 2010-03-23. 
  23. ^ "AIMR Obtains Favorable Ruling in Trademark Infringement Suit". Archived from the original on April 26, 2007. Retrieved 2010-03-23. 
  24. ^ "Delhi High Court Orders Stop To Unauthorized Use Of Global CFA Designation". Retrieved 2010-03-23. [dead link]
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  27. ^ "India FAQS: The CFA Program in India". Archived from the original on October 7, 2007. Retrieved 2010-03-23. 
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  29. ^ "MD, CFA Institute Discusses the Latest Developments on the CFA Exams in India". Retrieved 2010-03-23. 
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  31. ^ "FINRA List of Professional Designations Disclosure". 
  32. ^ "Investopedia Definition of CFA Chartered Financial Analyst". 
  33. ^ "Wall Street Journal Article " Financial Acronyms "". 

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