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Encyclopedia > Chartered Financial Analyst

Chartered Financial Analyst (CFA) is a professional designation offered by the CFA Institute (formerly known as AIMR) to financial analysts who complete a series of three examinations and work for at least four years in the investment decision making process. CFA charterholders are also obligated to adhere to a strict Code of Ethics and Standards governing their professional conduct. It has been suggested that this article be split into multiple articles. ... The CFA Institute, headquartered in the USA at Charlottesville, Virginia and formerly known as the Association for Investment Management and Research (AIMR), awards the prestigious Chartered Financial Analyst(CFA) designation. ... The CFA Institute, formerly known as the AIMR, awards the prestigious Chartered financial analyst(CFA) qualification. ... A financial analyst (or securities analyst, research analyst, equity analyst, investment analyst) works with financial analysis. ... To examine somebody or something is to inspect it closely, hence an examination is a detailed inspection or analysis of an object or person. ...


The CFA Designation

The CFA designation is a qualification for finance and investment professionals, particularly in the fields of investment management, investment banking and financial analysis of stocks, bond and their derivative assets. Investment management is the professional management of various securities (shares, bonds etc) assets (e. ... Investment banks help companies and governments and their agencies to raise money by issuing and selling securities in the primary market. ... Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. ...

The predecessor of the 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, the 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).

From 1963 (when the CFA designation was first awarded) to 2006, approximately 78,000 people from at least 126 different countries have been awarded the right to use the CFA designation, 68,000 of them in the years since 1990. As of 2006, more than 116,000 more people are currently enrolled to take one of the examinations. (However, a very small number of the most senior CFA charterholders who took their exams before 1970 were "grandfathered" in, having sat only the equivalent of today's Level III test instead of undergoing the current three level exam procedure. [1]) Year 1963 (MCMLXIII) was a common year starting on Tuesday (link will display full calendar) of the Gregorian calendar. ... 2006 is a common year starting on Sunday of the Gregorian calendar. ...

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 charterholders.[2] Year 2003 (MMIII) was a common year starting on Wednesday of the Gregorian calendar. ... For other uses, see Asia (disambiguation). ... For other uses, see Europe (disambiguation). ...

The basic requirements for participation, not membership, in the CFA program include holding or being in the final year of a four-year university degree(or international equivalent), or having four years of qualified, professional work experience in an investment decision-making process. [3] The program focuses on portfolio management and financial analysis, and provides a generalist knowledge of other areas of finance. Investment management, also called portfolio management or money management, it is a branch of investment analysis that looks into the process of managing money. ... Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. ... Topics in finance include: // Finance an overview Arbitrage Capital (economics) Capital asset pricing model Cash flow Cash flow matching Debt Default Consumer debt Debt consolidation Debt settlement Credit counseling Bankruptcy Debt diet Debt-snowball method Discounted cash flow Financial capital Funding Financial modeling Entrepreneur Entrepreneurship Fixed income analysis Gap financing...

Trademark Disputes

The CFA designation is not affiliated with the Chartered Financial Analyst degree offered by the ICFAI (Institute of Chartered Financial Analysts of India) University of India or its affiliate the Council of Chartered Financial Analysts. ICFAI offers Masters degrees in Finance which to lead to a CFA Charter issued by the CCFA. The ICFAI University (hereinafter referred to as the University) represents the multi-state network of universities, sponsored by the Institute of Chartered Financial Analysts of India (hereinafter referred to as the Institute) in Uttaranchal, Tripura, Sikkim, Meghalaya, Mizoram and Nagaland under respective legislations. ... The ICFAI University (hereinafter referred to as the University) represents the multi-state network of universities, sponsored by the Institute of Chartered Financial Analysts of India (hereinafter referred to as the Institute) in Uttaranchal, Tripura, Sikkim, Meghalaya, Mizoram and Nagaland under respective legislations. ...

In 1998, CFA Institute's predecessor organization, AIMR, sued and won a judgment [4] against ICFAI/CCFA. The judgment prohibited ICFAI/CCFA and its members from using the CFA or Chartered Financial Analyst mark in the United States and Canada. The ICFAI University (hereinafter referred to as the University) represents the multi-state network of universities, sponsored by the Institute of Chartered Financial Analysts of India (hereinafter referred to as the Institute) in Uttaranchal, Tripura, Sikkim, Meghalaya, Mizoram and Nagaland under respective legislations. ... The ICFAI University (hereinafter referred to as the University) represents the multi-state network of universities, sponsored by the Institute of Chartered Financial Analysts of India (hereinafter referred to as the Institute) in Uttaranchal, Tripura, Sikkim, Meghalaya, Mizoram and Nagaland under respective legislations. ...

In August 2006, an Indian court issued a temporary injunction against the Indian organization as well. [5] The judgments made no assessment of the quality of the Indian program and merely discussed the trademark violation. The Indian Association of Investment Professionals[6] is the only organization in India which is affiliated with the CFA Institute.

In January 2007, the Trademark Registry, UK refused to grant protection to the CFA charter. The word 'chartered' is restricted in the United Kingdom due to the association with royal charters. [7] A Royal Charter is a charter given by a monarch to legitimize an incorporated body, such as a city, company, university or such. ...

In September 2007 The Trademark Registry, India refused to grant the CFA charter to CFA Institute but removed the right of the Institute to use the CFA title and as a result of this the CFA Charter and Trademark now exclusively belongs to the Indian ICFAI in India. The ICFAI University (hereinafter referred to as the University) represents the multi-state network of universities, sponsored by the Institute of Chartered Financial Analysts of India (hereinafter referred to as the Institute) in Uttaranchal, Tripura, Sikkim, Meghalaya, Mizoram and Nagaland under respective legislations. ...

On May 8, 2007, the US District Court for the Eastern District of Virginia vacated a Default Judgment issued against ICFAI that the 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. Recognizing the merits of the ICFAI arguments, the Court vacated the October in the 1998 Default Judgment.

With the default judgement vacated ICFAI has informed that all the Indian CFA Charter holders can now officially and legally use their Charter in the US and Canada. The bar on Indian CFA's practising in the US has also been annulled as a result of the judgement. There are very few or no other articles that link to this one. ... There are very few or no other articles that link to this one. ...

The CFA exam

A group of CFA candidates waiting in front of the testing location of San Francisco before the test. Dec 2, 2006

Candidates generally take one exam per year over three years and are written at a postgraduate level for financial professionals. Exams are challenging, with only 40% passing the Level I and II exams and 50% passing Level III in June 2007. [8] 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 & Pacific Asia. Although the stated curriculum is at masters level, the exams are based on multiple-choice pattern and historically candidates have prepared for -and passed the exams using highly simplified study notes provided by third party vendors.[9]. Image File history File links CFA_SF_2006. ... Image File history File links CFA_SF_2006. ... Quaternary education or postgraduate education is the fourth-stage educational level which follows the completion of an undergraduate degree at a college or university. ... For other uses, see Europe (disambiguation). ...

  • The Level I study program emphasizes tools and inputs and includes an introduction to asset valuation and portfolio management techniques.
  • The Level II study program emphasizes asset valuation and includes applications of the tools and inputs (including economics, financial statement 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. For each category of questions, 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 has been defined as 70% of the top percentage of exam papers until 1989; since then, the grading method is not explicitly published.[10] and the minimum passing score is set by the Board of Governors after each exam. The Board of Governors review the results of a Standard Setting process and input from psychometricians. Standard Setting is a process by which CFA Charterholders from around the world review the exam and recommend, for each question, a minimum passing score for the "just qualified candidate". The minimum passing scores for each question are aggregated and presented to the Board of Governors as a recommended minimum passing score for the entire exam. 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 the CFA Institute. The curriculum includes: Curriculum has many different conceptions. ...

  • Ethics and Professional Standards
  • Quantitative Methods (such as the time value of money, and statistical inference)
  • Economics
  • Financial Statement 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.)

For exams in 2008 onwards candidates are required to purchase the curriculum readings from CFA Institute. Unsuccessful candidates are required to buy the same curriculum again when they re-Register for the exam.

The ethics section is primarily concerned with compliance and reporting rules when managing an investor's money or when issuing research reports, although there are some rules which pertain to more general professional behaviour (such as prohibitions against plagiarism). There are also rules that specifically relate to the proper use of the designation for charterholders and candidates. All of these rules are delineated in the 'Code and Standards'. For other uses, see Plagiarism (disambiguation). ...

The section on quantitative analysis is dominated by statistics and time series analysis. Other financial fundamentals such as the time value of money are also addressed. The statistics topics are fairly broad, but the main focuses are risk analysis, hypothesis testing and regression analysis. For the test, only two types of calculator are allowed (the Hewlett Packard 12C and the Texas Instruments BA II Plus). The test also features other quantitative topics, but these are covered in other sections. For example, calculating depreciation of assets is a part of financial statement analysis (accounting), and determining currency arbitrage is a part of international economics. The time value of money is the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal. ... This article is about the field of statistics. ... The HP-12C is a financial calculator made by Hewlett-Packard. ...

Both micro and macro economics are covered. There are sections for international economics, mainly related to currency conversions and how they are affected by international interest rates and inflation.

The accounting section is heavily tested at Levels I and II, but is not a significant part of Level III. It is divided into financial statements analysis and corporate finance. Financial statement analysis considers the statement of cash flows, the balance sheet, and the income statement. Each of these documents gives a distinct view into the state and operations of a company. Corporate finance uses these views of the company to make decisions about projects, deciding how they will impact the company. Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ... Domestic credit to private sector in 2005 Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ...

The section on security analysis is divided by the types of security. There is a general section on global markets, sections on equity (stocks), fixed income (bonds), and derivatives (futures, forwards, options and swaps). The first levels of the test require familiarity with these instruments, then the focus develops into correctly valuing them, and how to properly use them. This article does not cite any references or sources. ...

The final section is portfolio management. This section increases in importance with each of the three levels. Portfolio management is an analysis of the process of managing money. It depends heavily on all of the other topics. When managing money for others, ethics is obviously important. This section deals with how the investors' needs are met by the portfolio manager. Modern portfolio theory is also tested: the efficient frontier, Capital asset pricing model, etc. An estimation of the CAPM and the Security Market Line (purple) for the Dow Jones Industrial Average over the last 3 years for monthly data. ...

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 & Other Recognition

  • 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. (Details)
  • 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]
  • The charterholders of Chartered Financial Analyst (CFA) are recognized by UK's Securities & Investment Institute (SII) as the equivalent level of SII full membership (MSI) or fellow membership (FSI). (Details) Full membership of SII is recognized by several national investment professional bodies such as in Hong Kong (Hong Kong Securities Institute (HKSI).
  • Taiwan's Securities & Futures Institute (SFI) has approved the Chartered Financial Analyst (CFA) designation as equivalent to a local recognised industry qualification of Certified Securities Investment Analyst (CSIA) in Taiwan. (Details) [12]
  • The Academic and Accreditation Advisory Committee of HK's the Securities and Futures Commission (SFC) has approved the Chartered Financial Analyst (CFA) designation as a recognised industry qualification for the licensing of Responsible Officers in Hong Kong. (Details)
  • The charterholders of Chartered Financial Analyst (CFA) 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. (Details)
  • The charterholders of Chartered Financial Analyst (CFA) are recognized by HK's Hong Kong Securities Instutites (HKSI) as the equivalent level of HKSI full membership (MHKSI). (Details)
  • The CFA charterholders are recognized by PRMIA (Professional Risk Managers' International Association) as the equivalent of passing first two required exams. ([13] PRMIA)
  • Exemptions are available for various modules in the South African Registered Persons Examination, depending on the candidate's level. No exemptions are available for the examination on local market regulations and compliance.

The New York Stock Exchange (NYSE), nicknamed the Big Board, is a New York City-based stock exchange. ... The Securities and Exchange Commission, commonly referred to as the SEC, is the United States governing body which has primary responsibility for overseeing the regulation of the securities industry. ... With over 330,525 CPA members (in August 2006), the American Institute of Certified Public Accountants (AICPA) is the largest professional organization of Certified Public Accountants (CPAs) in the United States of America. ... The American Institute of Certified Public Accountants (AICPA) is a self-regulatory organization of certified public accountants (CPAs) in the U.S.. The AICPA authors the CPA exam and is a major organization to develop generally accepted accounting principles (GAAP) along with SEC, FASB, and GASB. It is a major... Business valuation is a process applied by qualified valuation experts to determine the fair market value of an owner’s interest in a business. ...

External links

  Results from FactBites:
CFA Exam, Chartered Financial Analyst Information from Allen Resources (815 words)
Chartered Financial Analysts are often featured in the Wall Street Journal, or on CNBC as specialists in the investment industry.
The charter is awarded to professionals in financial analysis who have completed a comprehensive course of study including three sequential exams administered once annually.
The CFA charter is a mark of achievement as well as dedication to the continuing pursuit of knowledge, experience, and ethical principles that makes charterholders competitive in any market.
  More results at FactBites »



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