CFA Society of South AfricaBob Johnson, CFA, PhDManaging Director, CFA and CGIPS Programs Division

December 2005

CFA Institute

Member Organization with no corporate or political tie-ins: Offices in Charlottesville, Virginia; New York, Hong Kong, London

Mission: To lead the investment profession globally by setting the highest standards of ethics, education, and professional excellence

Members: 80,000 investment professionals in 120 countries; 84% hold the CFA charter

Societies: 131 societies in 52 countries

Member Distribution

74%

12%

11% 2%

1%

N. AmericaEuropeAsia-PacificAfrica/ Mid EastLatin America

CFA Candidate Distribution

47%

15%

31% 5%

2%N. AmericaEuropeAsia-PacificAfrica/ Mid EastLatin America

Strategic Objectives

1.Protect and build the CFA brand

2.Position the CFA Centre as a thought leader in setting ethical and professional standards

3.Reshape the organization to be more flexible and responsive…a more integrated CFA Institute/Society model

4.Leverage CFA Institute core competencies into new opportunities

5.Position CFA Institute as the respected leader in the field of education for investment professionals

Strategic Objectives

1.Protect and build the CFA brand

Inaugural CFA Examination—1963

CFA Examination 2004

Candidate Growth

0

20,000

40,000

60,000

80,000

100,000

120,000

FY1990

FY1991

FY1992

FY1993

FY1994

FY1995

FY1996

FY1997

FY1998

FY1999

FY2000

FY2001

FY2002

FY2003

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FY2005

Charterholders CFA Enrollment

South African Candidates and Members

• In 2005 there were 1,811 candidates enrolled in the CFA Program in South Africa• 608 candidates enrolled for the exam tomorrow in Johannesburg• 810 CFA Institute members in South Africa• 762 active CFA charterholders in South Africa

“More often than not, the market simply votes with its feet - in some areas of financial services, for example, the highly regarded CFA (chartered financial analyst) qualification has become a much more important ticket to the top than the MBA.”Business Day (South Africa)21 May 2004

“Becoming a CFA is now a passport for excellence and international mobility.”Financial Times21 June 2004

“…there is increasing demand for qualifications that will travel. One of the most successful solutions has been the Chartered Financial Analyst certificate, a qualification popular among the investment banks that is roughly equivalent to a specialised postgraduate finance degree.”Financial Times14 November 2005

“The CFA designation is the hallmark of excellence in the global investment community. It is well recognized that individuals who have earned the CFA charter have made personal commitments to an extensive study programme and to professional standards of behavior.”Bermuda Sun29 October 2003

“The Chartered Financial Analyst (CFA) qualification is roughly equivalent to a specialised postgraduate degree, including a mixture of economics, ethics, law and accountancy. It is much liked by employers in financial services. Whereas there are tens of thousands of finance degrees available around the world, ranging from excellent to worthless, there is only one CFA…”

The successful candidate will take on a leadership role in developing the Finance Concentration and contributing to classes supporting the Chartered Financial Analyst (CFA) program.

Today's investment management professionals need more sophisticated management practices and professional training.

Graduates need rigorous analytical training and practical understanding beyond that offered in general business programs.

The MSIM Program is designed to meet this need.

The program trains students in leading-edge theory and practice in the field of investment management. Students gain expertise in the design, management, and marketing of investment products.

The program also provides the background necessary for preparing for the CFA® exams.

Get an Edge on Your Investment Career

The MSIM Program is ideal for:

Individuals who want to advance their investment careers

Professionals in other industries who have related skills and would like to enter the investment field.

The program also provides the background necessary for preparing for the CFA® exams

Regulator Recognition

• New York Stock Exchange• UK Financial Services Authority• Hong Kong Securities & Futures Commission• State/provincial waivers around the world

Pass Rates

0%

50%

100%

'63 70s 80s 90s 2005

Combined Pass Rates

2005

• Level I—36%

• Level II—56%

• Level III—55%

Historical Averages

• Level I—49%

• Level II—52%

• Level III—67%

The CFA® Program

EXAMINATIONSCURRICULUM

BODY OF KNOWLEDGE

GLOBAL PRACTICE ANALYSIS

GRADING

MINIMUM PASSINGSCORE (MPS) -

BD OF GOVERNORS

CCC COE

Practitioners at every step of the process

Global Practice Analysis

• Conducted every five years

• Panels of employers and investment professionals assembled around the world

• Panel results compiled and CBOK revised

• Advisory Board of CFA charterholders reviews changes to CBOK and sets specifications for charterholder survey

• Survey of CFA charterholders around the world (scheduled for January of 2006)

Developed by Candidate Curriculum Committee (CCC); 150 people involved (all charterholders) from all over the world; extensive review; each level 18 study sessions in CFA Institute-produced study guides

Study Guide Topic Focus Learning Focus

Level I Investment Knowledge Tools and Ethical Standards

Level II Asset Application Valuation and Ethical Standards

Level III Portfolio Synthesis and Management Ethical Standards

Curriculum

Each study session is designed for flexible, self-directed study

Each reading has learning outcome statements (LOS): “The candidate should be able to…”

Readings are drawn from a variety of materials, both CFA Institute and other

Curriculum

CFA Examinations

Written and reviewed by CFA charterholder practitioners from all over the globe.

The Council of Examiners are subject matter experts who have been trained in question writing

Form of questions Multiple Choice (Level I)

Item Set (Level II & III)

Constructed Response (Level III)

Examinations

Developed by Council of Examiners (COE) – CFA charterholder practitioners and staff; over 80 people from all over the globe involved, 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%

EXAMINATION ADMINISTRATION

• In 2005, over 110,000 candidates• 184 exam sites in June in 89 nations• 48 exam sites in December• Candidates came from 144 nations

321 graders27 countries2,389 total years graded145 senior graders

2005 Grading Population

MPS for each level established by CFA Institute Board of Governors who are also CFA charterholders

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

Minimum Passing Score

Employer Outreach

• Goals

Build wider recognition and appreciation of CFA Institute and what it means to hold the CFA charter

Encourage employers to:

Hire CFA charterholders

Cover the costs of CFA Program enrollment

Adopt CFA Institute standards as their own

Use what we learn in product and service development• Resources added for this effort

Peggy Eisen, CFA…Managing Director of Marketing

Chuck Tschampion, CFA…Director of Industry Outreach

University Outreach

• Goals

Encourage universities to adopt a “CFA track” in their graduate and undergraduate degree programs

– Serves as third-party endorsement of value of CFA Program

Get more universities to adopt CFA curriculum– Technology allows us to custom publish textbooks for specific

uses

Promote the merits of the CFA Program to the next generation of investment professionals

• Resources added for this effort

Bob McLean, CFA…Director of University Relations

Strategic Objectives

2.Position the CFA Centre as a thought leader in setting ethical and professional standards

Integrity

CFA Centre for Financial Market Integrity

• Launched in November 2004• Mission is to:

Be a leading voice on issues of fairness, efficiency and investor protection in global capital markets

Promote high standards of ethics, integrity, and professional excellence within the investment community

• Distinct unit of CFA Institute• Advisory council chaired by John Neff, CFA

CFA Centre for Financial Market Integrity

Corporate Governance

Regulatory Outreach

Financial Reporting

Code of Ethics

Trade Management Guidelines

Asset Manager Code

GIPS

AIMR-PPS

Capital Markets Policy

Professional Standards

Investment Performance Standards

CFA Centre Initiatives

CFA Institute Code of Ethics– Revisions take effect in January ‘06

Asset Manager Code of Professional Conduct

Soft Dollar Standards

Trade Management Guidelines

Research Objectivity Standards

Issuer/Analyst Best Practices

Corporate Governance Manual

Business Reporting Model

Ethics Training (in beta test mode)

Strategic Objectives

3.Reshape the organization to be more flexible and responsive…a more integrated CFA Institute/Society model

Name Change

Branding Chaos

Branding Harmony

Member Communication

Strategic Objectives

4.Leverage CFA Institute core competencies into new opportunities

CGIPS Program

Certificate in Global Investment Performance Standards (CGIPS)

– A specialty program for investment performance professionals

– Independent of the CFA Program

Major Topic Areas– Ethical standards – Performance measurement, attribution, and

appraisal– The GIPS standards, including the real estate

provisions

Purpose of CGIPS Program

1. Professionalize the field of investment performance evaluation/presentation

2. Improve practitioners’ proficiency in applying analytical techniques and the GIPS standards

3. Recognize individuals who attain the highest achievement in the field

Who Should Participate in CGIPS?

Investment managers

Verifiers

Investment consultants

Plan sponsors

Custodial banks

Regulatory agencies

Software developers

To Earn the CGIPS Credential

Sequentially pass two computer-based examinations

Principles and Expert

Meet two-year experience requirement in performance-related positions

Agree to comply with the CGIPS Association Code of Ethics and Standards of Professional Conduct

Become a member of the CGIPS Association

Strategic Objectives

5.Position CFA Institute as the respected leader in the field of education for investment professionals

Education

Holistic approach to post-graduate education for the investment professional

Core generalist exam from practice analysis

Flexible professional development– By specialty track– Broad scope: our offerings plus links to others– Easy-to-use PD diary

Diverse offerings– Conferences and written proceedings– Webcasts– Publications (Financial Analysts Journal & CFA Digest)

Aspire to be the “go to” organization for you and your firm’s professional development?

Organizational Assets

No corporate interest group tie-ins

80 years of societies—investment community

60 years of luminaries in Financial Analysts Journal

40+ years of CFA Program

40+ years of Code of Ethics

Working relationship with regulators– We prefer self-regulation over regulation– Better for:

– Investment firms– Regulators– Investors

What Can You Do?

Above all else—help us to maintain our excellent reputation

Be a part of this community—on your terms, but let us know that you’re connected

Volunteer—locally or on an advisory council

Respond to our surveys—it’s our best way to monitor your needs

Push your firms and your clients:– To hire CFA charterholders and members of CFA

Institute– To calculate performance using GIPS– To adopt an asset manager code of ethics

Recruit young candidates—instill in them the importance of the CFA Program and its curriculum