CFA Certification Requirements

The CFA designation stands for Chartered Financial Analyst and is awarded by the CFA Institute. The designation is clearly an exclusive honor. The program, which must be completed to obtain the CFA designation, is a graduate level program that takes 3 years to complete and has three 6-hour exams.

The CFA Designation

The CFA designation is a very difficult and complicated program of study. In order to enroll in the 3-year education program, you must be in the last year of your bachelor's degree program or already have a bachelor's degree earned. I addition to the education requirements, you must also have a minimum of 4 years' related work experience. Before you receive the actual designation, you must have 48 months of financial analysis work experience in a decision-making capacity.

The CFA Curriculum

The CFA curriculum is very challenging and includes topics chosen from the finance, statistics, economics and accounting fields of study. Quantitative methods, financial reporting, corporate financing, portfolio management and investment analysis are all included in the program of study. The investment analysis includes stocks, bonds, derivatives and venture capital. The quantitative methods include the study of time value of money. The CFA program also has a strict ethics course. Ethics are found throughout the entire program of study.

Level I

The Level I education program and exam is heavily weighted in accounting concepts. This exam includes topics on financial reporting, asset valuation and portfolio management methods. This is a 6-hour exam that had an overall first-time pass rate of approximately 35 percent in 2008. The 10-year average pass rate for Level I was 41 percent. It has the lowest average pass rate of all three exams.

Level II

The Level II exam continues with many of the same topics covered in Exam I. Asset valuation and input data scrutiny is covered in greater detail. Level II picks up financial statement analysis and quantitative methods. These finance topics are very difficult and include the time value of money. Other topics include hypothesis testing, regression analysis and time series analysis. The 2008 pass rate for the Level II exam was 46 percent. The 10-year average pass rate was 46 percent. This is a much higher average pass rate than that of Exam I.

Level III

The final exam, Level III, brings the concepts learned in prior courses together with strategies for applying the information. The third exam includes applying economic analysis to overall portfolio management. Both microeconomics and macroeconomics are included, as well as international economics. Equity management, derivatives and heavy modeling are applied to round out the course of study. All of the topics learned in the first two sections are brought together and incorporated into portfolios. The Level III exam has the highest pass rate of all three exams. The 2008 pass rate was 53 percent; the 10-year average was 63 percent.

Ethics

The ethics segment covers compliance and reporting rules when managing a client's money. Many of the rules pertain to professional behavior and the proper use of the designation. There is a Code of Ethics that all CFA candidates and charter members must accept and operate by. Here are the topics covered by the code of ethics and standards:

Code of Ethics:
1. Place the integrity of the profession and the interests of clients above your own interests.
2. Act with integrity, competence and respect.
3. Improve and maintain your professional competence.

Standards of Professional Conduct:
1. Professionalism.
2. Integrity of the capital markets.
3. Duties to clients.
4. Duties to employers.
5. Investment analysis and recommendations.
6. Conflicts of interest.