The CFA: A qualification defined by ethics

29 / 05 / 2012
Category: Blog

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FOR investment professionals with an eye to further their careers, the Chartered Financial Analyst (CFA) qualification provides a broad-based foundation. Described by the CFA Institute as “a globally recognised, graduate-level investment credential,” the course takes place on three levels, built around the idea that all should be educated in a rigorous corpus of shared knowledge.

But charterholders are taught over and above the basic skills and knowledge to be successful in investment. To carry the CFA designation is to uphold and adhere to a demanding standard of ethics. As the CFA Institute approaches its fiftieth anniversary, this aspect is more appropriate, more relevant, and more useful than ever.

Ed Bace, head of education for Europe, Middle East and Africa at the Institute, describes its primary purpose as “to lead the investment profession globally for the ultimate benefit of society.” In the eyes of the Institute, it’s important for everyone that investment should be open, transparent, and conducted fairly – not sold or handled opaquely, and without concern for clients.

Ethics has been at the centre of the qualification since inception but given “a recent disconnect between Main Street and Wall Street,” it’s the profession’s responsibility to “rebuild trust,” says Bace.

The cornerstone position of ethics is more than abstract, not solely important for the broader profession but for individual professionals. A grounding in ethical conduct “adds to the credibility of the professional-client relationship,” Bace says. It’s a “competitive advantage to command a greater degree of trust.”

The Institute acknowledges that ethical standards are not static – especially in a sector in which new models of client-professional relationship and investment activity arise every year. It continuously updates its professional handbook, and works with regulators and authorities to advocate measures to protect investors.

The strength of the Institute is intertwined with that of the charter. The first upholds the latter. Bace explains that “we are strict, we take ethical transgressions very seriously. We publish a list of incidents and disciplinary actions taken. Members remain aware of our standards, and how seriously we take them.”

There’s a benefit to being part of a recognised professional body – and one which is active in ensuring its standards are relevant and upheld. Engagement with the Institute provides individual charterholders with knowledge of the changing regulatory landscape, and advice on how to conform to these standards. Investment professionals need not imagine or hope that their actions are ethical. They can be sure through the critical overview of the overseeing body.

Crucially, this ethical foundation is built on close cooperation and partnership between the Institute, other professional organisations, and regulators across the world. The onus on professionalism, and recognition of this standard globally, enables CFA charterholders to transfer their experience from one investment environment to another.

There are 107,812 members of CFA Societies – of which only 17,178 are in Europe. Membership of this body of globally-recognised ethical conduct builds on the actions of those who are already members.

As Nitin Mehta, managing director for Europe, Middle East and Africa, of the CFA Institute, makes clear, while hiring in finance and the investment industry has cooled, “the number of CFA Institute members, as well as candidates for the CFA programme, has grown to new record levels.” While industry size remains uncertain, a visible commitment to professionalism is increasingly not just important, but essential. It’s a hallmark of quality.

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