CFA Level I: Ethical and Professional Standards

By Stella Goh – Market Data Analyst | 30 May 2019

Ethical and Professional Standards have a very high value on ethics in CFA for all three levels and consider as a fundamental value and essential, which used to help in achieving the mission that can lead in profession globally by promoting the highest standard of ethics, educations and professional excellence for the benefit of society.

In this topic, the questions in an exam may provide you with a particular situation and require you to judge whether the cases have violated any part of the Code of Ethics or Standards of Professional Conduct. Candidates must know the ideas and concept of the importance of ethical behaviour in the investment industry and the ways to apply the Code of Ethics into ethical decision making.
There are five readings on this topic. Let’s look at what can we learn from the five passages.

Reading 1 Ethics and Trust in the Investment Profession

In this reading, we can know the overview of the importance of ethics for investment professionals. Ethics encompass a set of rules and moral principles of conduct that guide our behaviour. Candidates can learn the introduction of ethics, identify the challenges face to the ethical practices, and able to describe the role of Code of Ethics in defining a profession. The problems of ethical behavioural may include one’s being too confident in their morality, underestimate the effect of situational influences, and focusing too much on the immediate rather than long-term outcomes or consequences of a decision.

Besides learning how to describe the needs for high ethical standards in the investment industry, candidates are also able to distinguish the difference between moral and legal standards. Code of Ethics helps to foster the confidence of the public with the use of their specialised skills and knowledge to serve on their clients to advance their profession.

Reading 2 Code of Ethics and Standards of Professional Conduct

In this reading, candidates can learn more about the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of Code and Standard. The most crucial part in this section is that candidates must understand the six components of Code and Ethics and 7 Standards of Professional Conduct. The Code of Ethics and Standard of Professional Conduct served as an ethical benchmark for investment professionals around the world. It is essential that a candidate must understand more on the moral responsibilities which are required by the Code and Standard, including with the subsections of each of the standard.

Reading 3 Guidance for Standards of Professional Conduct

The Standard of Professional Conduct is the heart of ethics content in CFA exam. In this reading, candidates can know how to apply the Code of Ethics and Standard of Professional Conduct to the ethical dilemmas which can happen in days-to-days professional activities. In the CFA textbook Level I of this reading, there are few real-world examples of situations and guidance which can help candidates to have a better understanding for each sub-sections for the 7 types of Standards of Professional Conduct.

Besides candidates can learn on how to distinguish the conduct that conforms to the Code and Standards and behaviour that may violate the Code and Standards, they will also be able to learn on to recommend the practices and procedures designed to prevent the violations of the Code of Ethics and Standard of Professional Conduct.

Reading 4 Introduction to the Global Investment Performance Standards (GIPS)

The objective of this reading is to ensure the Level I candidates can approach the assigned sections of Global Investment Performance Standards (GIPS). GIPS played an essential role because through the compliance with the GIPS; it is to assure the firm’s historical results are present consistently and fairly. From this reading, candidates can understand what the reasons of Global Investment Performance Standards (GIPS) are being created, what parties can claim the GIPS standards compliance and who will be benefited and served by the standards.

Besides, candidates are also able to understand what is the construction and critical notions of the composites in the performance reporting preview the structure of the standards and even able to learn on how to explain on the requirements for verification.

Reading 5 The GIPS Standards

In the last reading of this chapter, candidates can learn the key features of the Global Investment Performance Standards (GIPS) and the fundamental compliance. There is nine significant sections of GIPS will be discussed in this reading. Besides, candidates are also able to learn the scope of the GIPS Standards concerning the investment firm’s definition and no further on what is the requirement a firm should meet before claim the GIPS compliance. For examples, GIPS reporting standards require the firms to publish 5 years of investment results and so on to claim the GIPS compliance.

The most critical part in this reading is the candidates can learn on how is the GIPS standards are implemented in the countries with existing standards for performance reporting and describe the appropriate response when the GIPS standards and local regulation conflict.

Conclusion

In conclusion, all CFA members and candidates are obliged to obey by the provision of the Code of Ethics and Standards of Professional Conduct. Any violations of the Code of Ethics or Standards of Professional Conduct may result in appropriate disciplinary sanctions including, but not limited to, the exclusion from the CFA Program or the revocation of the CFA designation.

Reasons to Become a Chartered Financial Analyst (CFA)

By Stella Goh – Market Data Analyst | 15 May 2019

There are more than 100,000 CFA charter holders in over 135 countries and increase of demand worldwide for the CFA Program, the charter has become global professional investment credential which allows the student to practice across the international boundaries. The recognition for this charter is base on the candidate’s knowledge and professional standard embodies in the program makes the CFA designation as a mark of global distinction of investment professionals worldwide. CFA Charter is recognised and rewarded by employers, respected by regulators and investment institutions.

The Breadth of Knowledge and Real-World Expertise

By studying the CFA Program, you can explore more knowledge on investment combined with comprehensive global views, and up-to-date practical skills allow the investment professionals expertise in quantitative methods, economics, financial reporting, investment analysis, portfolio management, etc. The analytical skills and the knowledge learnt from the CFA Program assist them in analysing the risks and rewards of a variety of investment types to address client-specific investment needs throughout their career which they can manage the investment anywhere due to CFA has mastered the Global Body of Investment Knowledge (GBIK). Since the practising of CFA charter holders around the world also practising on the evolution of Global Body of Investment Knowledge, it is standardised, consistent and based on knowledge relevant.

According to the CFA Institute, the top 10 employers for Chartered Financial Analyst are JP Morgan Chase, PricewaterhouseCoopers, HSBC, Bank of America, Merrill Lynch, UBS, Ernst & Young. RBC, Citigroup, Morgan Stanley and Wells Fargo.

Career Advancement Opportunities

The Chartered Financial Analyst (CFA) certification is almost a guarantee of advancement in an investment career path and to boost financial credentials. Besides, CFA Charter is also known as the toughest exam with an average passing rate of 42% over the ten years. Most of the people in the industry know that to become a CFA charter holder, one requires a lot of time for studying and one must have discipline enough to manage their time for their studies. There is also a global network of over 135,000 investment professionals in the world implies that there is an impressive club to join after becoming a CFA Institute member for the networking opportunities. After acquiring the CFA Charter, you can find a variety of investment-related jobs such as investment analyst, portfolio manager, risk analyst and so on.  Let us look at some of the few examples of employment job that charter can apply.

a) Research Analyst

Research analyst is a professional who serves as investigators to analyse the data such as financial information, performance trends, economic trends and news, political climate, and specific development of the companies for future performance. Sometimes, the research analyst also referred to as an equity research analyst, investment analyst or security analyst. They synthesise their analysis of the data into the research report on their methodology for investors client conclude with recommendations to advise them on whether to buy, sell or hold on specific stocks.

b) Financial Analyst

Financial Analyst is a professional who examines more on economic data and use their findings to help companies make a business decision. They use spreadsheet and statistical software package to analyse financial data, spot trends to develop a forecast. Some of the financial analysts will collect the industry data such as balance sheet, income statement, merger acquisition history and economic news for their clients. The financial ratios will be calculated from the data that they have gathered to help the client to read the bottom line of the company. However, not all of the financial analyst work in the stock or bond market. Some companies might hire a financial analyst to help them determine the strength and weakness lie in their business and make profit or losses forecast.

c) Portfolio Manager

Portfolio manager also can be referred to as an investment manager, wealth manager, asset manager and financial manager. The primary responsibility of a portfolio manager is to create and manage asset allocations for some clients. They spend a lot of their days working together with analysts, researchers, and clients based on the current market events, business news, and financial market. A portfolio manager with expert insight and experience can make an informed decision for their clients. They are also responsible for meeting with investors to have an explanation on their research, strategy and rationale for the arrangements.

In most of the cases, they follow a predetermined strategy of investment, dictated by investment policy statements (IPS), to achieve a client investment objective. Some of the portfolio managers may craft the investment packages supplied to the clients, while some of them manage the client expectation and transaction. They should buy and sell securities in an investor’s account to maintain a specific investment strategy or objective over time.


Based on the June 2018 CFA Program Candidate Survey from CFA Institute official website, the majority of jobs of employed candidates work as a research analyst, investment analyst and quantitative analyst which consist of 12%. 9% of candidates work as an accountant or auditor, 8% of candidate work as a corporate financial analyst and 7% of candidates work as a consultant, and 5% of candidates work as risk analyst or manager, relationship manager, account manager, credit analyst, and portfolio manager each.

Conclusion

By acquiring the CFA designation can help to distinguish the charter holders from other counterparts in the eyes of professionals and investors. As a result, you can expect your career to benefit more flexibility and higher compensation compared to if you do not have the CFA Charter.

What Should You Know Before Register for Chartered Financial Analyst (CFA)

By Stella Goh – Market Data Analyst | 8 May 2019


What is Chartered Financial Analyst (CFA)

Chartered Financial Analyst (CFA) is a globally-recognised professional designation offered to finance and investment professional, administered and awarded by American-based CFA Institute. This program provides the most reliable foundation in investment, analysis and real-world portfolio management skills along with the practical knowledge you need in the industry.

Candidates who qualify in CFA exams will be designated with the CFA credential. Candidates are required to pass all three levels of exams covering areas such as Ethics, Quantitative Methods, Economics, Financial Reporting and Analysis, Corporate finance, Portfolio management, Equity investments, Fixed income, Derivatives and Alternative Investments. This credential is mostly sought after by finance and investment professionals looking forward towards building a career in investment banking, financial management, financial analysis on stocks, derivatives and so on.

Entry Requirement

First of all, before you register as a CFA candidate, you need to fulfil specific requirements. The CFA Institute requires that every CFA Program candidate must have a valid international travel passport to register or sit for the exam. All of the candidates must be prepared to take an exam in English because CFA Program exams are only in English. CFA charter holders, regular members, affiliate members, and candidate in CFA Programs must complete a Professional Conduct Statement form to attest that they comply with their requirement.

Besides, the candidate also must have either one of these:-

a) Have a bachelor’s (or equivalent) degree, OR

If you are not sure that your program is compatible with the CFA program, you can have enquiries from your college or university.

b) Be in the final year of a bachelor’s degree program, OR

If you are a student in final year program of your degree, you can also register for the Level 1 Exam, but you must complete your degree program before registering for CFA level II.

c) Professional Experiences

If you have a combination of professional work experience and education with a total of at least four years, you are also eligible to register for CFA Programs.

Practical Work Experience

CFA candidate must take note that they must have a minimum of four years which equivalent to 48 months of experience in evaluating or applying financial, economic, and statistical data as a part of investment decision making the process, supervising people who conduct or teaching activities. Almost 50% of your time must be spent directly in the investment decision-making process or producing a work product. They must work full time before, during or after they have participated in the CFA Program.

Exam Structure

To acquire the Chartered Financial Analyst, each of the candidates required to complete three levels of the exam.

a) CFA Level I

Tier I exam consist of 240 multiple choice questions separate into two sessions which are morning and afternoon. Each session is covering 120 multiple choice question with a duration of 3 hours per session.

b) CFA Level II

For the Level 2 exam, there are 18 sets of six multiple-choice questions, 3 sets with four multiple-choice questions, a total of 21 sets. It is also broke into two sessions, morning and afternoon, covering 60 sets of multiple choice question with a duration of 3 hours per session.

c) CFA Level III

For the morning session, it includes of constructed response (essay) which will be between 8 and 12 questions with several subparts. While for the afternoon session, there have ten sets of a subject with a total of 6 questions each part.

Percentages in CFA Exam Topic Area

Topic Area

Level I (%)

Level II (%)

Level III (%)

Ethical & Professional Standards

15

10 – 15

10 – 15


Quantitative Methods

10

5 – 10

0

Economics

10

5 – 10

5 – 10

Financial Reporting & Analysis

15

10 – 15

0

Corporate Finance

10

5 – 10

0

Portfolio Management

6

5 – 15

35 – 40

Equity Investment

11

10 – 15

10 – 15

Fixed Income

11

10 – 20

15 – 20

Derivatives

6

5 – 10

5 – 10

Alternative Investment

6

5 – 10

5 – 10

Total

100 %

100 %

100 %

Based on the illustration above, we can say that for CFA Level I, the Ethical & Professional Standards and Financial Reporting & Analysis consist of the highest marks compared to other subjects. While for CFA Level II, Ethical & Professional Standards, Financial Reporting & Analysis, Portfolio Management, Equity Investment, and Fixed Income may be the highest marks among other subjects. While for CFA Level III, the portfolio management may consist of the most top scores among the different topic.

Passing Rate

Based on the information from CFA Institute’s website, the passing rate for three levels of the CFA exams is not high. In June 2018 exam, the passing rate for Level I is 43%, Level II is 45%, and Level III is 56%. While for December 2018 exam the Level 1 passing rate is 45%.

Passing the CFA Program, one must have a solid discipline and an extensive amount of studying. They need to arrange their time very carefully because each exam typically required you to put hard work for more than 300 hours. With the given of the considerable amount of time that must spend on study, many candidates deterred from continuing the CFA Program after failing the first levels.

Each candidate who sits for the CFA Program exam will be provided with exam results and detailed information on their performance. After candidates receive their results, they can start to register for the next exam. Candidates who did not pass the exam can re-take the exam at a later date. They can take as much time as they need before registering for the next exam. To pass a CFA Exam, candidates must score a minimum score of 70% for each of the subjects.

Exam Fees

  Early Registration Standard Registration Late Registration
Program Enrolment (New Candidate Only)

USD 450

June 2019 Exam

Ended Sep 2018

Ended Feb 2019

Ended Mar 2019

December 2019 Exam

Ended Mar 2019

Ended Aug 2019

Ended Sep 2019

Exam Registration
(All Candidates)

USD 650

USD 950

USD 1,380


* Program fees are subject to change.

For the one who is the first-time register for CFA exam, you are required to pay a one-time program enrolment fees which are about USD450 together with the exam fees of USD650. After you have done your CFA Level I, you need to register for CFA Level II; you only need to pay USD650 for Level II if you register the exam earlier. The earlier you register for, the cheaper the fees which you can refer to the table as above.

The program fees are subject to change. However, the exam fees are in US Dollar, when you want to make the payment, it will base on the current currency exchange rate in the market. The costs of the exam fees are including the e-book for you to study. For the hardcopy of the original textbook, you need to purchase when you are making payment for your exam fees.

Self- Studying / Tuition Centre

You can choose to self-study in the house or study in a tuition centre across the country. There are few tuition centres provide CFA courses such as Noesis Exed, Kasturi, TARUC, Sunway College, etc. Different tuition centre may charge a varying fee. Noesis Exed charges a registration fee of RM500 in one time off, course fees plus revision course fees is around RM6,500 per level. However, they offer a discount for a student or ex-student from TAURC, RMIT Monash University, Help University, UiTM, UTAR & Sunway University, etc. If you are choosing self-study and currently have a full-time job, you need to manage your time very well. Sometimes, when the exam is around the corner, you need to take leaves to study at home.

Conclusion

Based on my experience, the CFA exams are challenging, the exam questions are tricky, but if you spent your efforts to study, you might pass the exams by studying over 300 hours by utilising all the alternative prep materials, do a lot of practising questions as possible. Companies across the finance industry recognise the CFA Program. CFA candidates, who completed all of the exams, can advance their investment careers through the knowledge they gain and their access to an extensive and impressive network of CFA professionals.

Understanding on Types of Orders in Trading Platform

By Stella Goh – Market Data Analyst | 3 May 2019


At most of the time, brokers and dealers will help to arrange trades by issuing the orders after communicate with buyers and sellers. In the stock market, there are bid price and ask price. Usually, investors or traders buy the stock at the asking price and sell stock at the bid price in the stock market.

In the stock market, the asking price is always higher than the bid price. The highest the bid price in the market is the best bid, while the lowest ask prices in the market are the best offer. Before you are buying or selling the stocks, you must know the different types of orders.

Let’s look at the types of orders in the market.

Market Order

The market order is an order to buy or sell the order immediately at the best available price. This type takes the execution directly but may not able to acquire the stock at the desired pricing. It may be filled in at a more higher price. Thus you may get more expensive share than anticipated if no willing seller to sell to you at the market price. For example, the market’s ask price for Stock ABC’s is RM3.00, and you may want to buy this Stock ABC immediately at this price. RM3.00 is the current price assuming that the market is open at the moment.

Limit Order

A limit order is an order to buy or sell a security at a specified price. There are two types of limit orders in the market, buy limit order and sell limit order. Limit orders do not execute if the limit price on a buy order is too low, or the limit price on a sell order is too high.

The buy limit order is an order to buy at lower than current market price and only will be executed when asking price drop to the preset level. For example, the current ask price for Stock ABC is RM5. If you wish to buy ABC Stock at RM4, submit a buy limit order of RM4 or lower. Then wait for the price to drop to RM4, the order will perform. If the price never drops to RM4 or lower, the order will not fulfil.

A sell limit order is an order to sell at a higher level than the current market price at a specified price. For example, the current ask price for Stock XYZ is RM12. If the investors or traders wanted to sell Stock XYZ at RM15 which is higher than the current market price, they need to submit a sell limit order at RM15. After that, they need to wait for the current price of the Stock XYZ rises until RM15 or higher; the order only can be executed. However, if the price never rises to RM15 or higher, that means the investors or traders will never sell.

Stop Order

Stop order is an order use to buy or sell a security once the price of the security reached a specified price which is also known as the stop price. There are two types of stop orders such as Sell stop and Buy Stop.

Sell stop order is an order placed below the current price, once it hit the program will execute sell. For examples, the investors or traders bought a stock at RM20 and may want to sell the stock if the stock price falls below RM10 to limit losses. Therefore, the investors or traders can submit a Good-Till-Cancelled Sell Stop at RM10 level. If the market price of the stock falls to or below RM10, the market order becomes valid, and it should immediately fill the order.

Stop buy order is an order which traders will use to buy at higher than the current market price. For example, the Stock EFG currently is traded for RM40. So you can place a Good-Till-Cancelled buy stop order on the stock for RM50. The reason why not use market order is some trader would like to see the stock reach specific price first for confirmation before buying the stock. Once the stock arrives RM50, their order takes effects.  Good-till-canceled is an order that investors or traders may place to buy or sell a security that remains active until the order is filled or the investor cancels it.

Conclusion

In conclusion, understand and familiar with the trading platform to execute transaction should be able to help trader/investor on advantages to better manage the entry and exit point for their investment.