Ethics and Standards - Standard VII: CFA Responsibilities

There are two subsections under this final standard:

  • Standard VII-A: Conduct as Members and Candidates in the CFA Program
  • Standard VII-B: Reference to CFA Institute, the CFA designation, and the CFA Program

Standard VII-A: Conduct as Members and Candidates in the CFA Program

Members and Candidates must not engage in any conduct that compromises the reputation or integrity of CFA Institute or the CFA designation, or the integrity, validity or security of the CFA examinations.

Reasoning behind Standard VII-A
This Standard specifically addresses the integrity or validity of the CFA examination process. Obviously, cheating on the exam in any manner is an act of moral turpitude, but the integrity of the CFA exams is of such great importance to the profession and to the members of the CFA Institute that misconduct in this area is of particular importance. CFA members are proud of their accomplishment and want to protect the examination process to ensure that the CFA charter is awarded based on merit.

Applying Standard VII-A
All of the following activities would be considered a violation of Standard VII-A:

  1. Cheating on the CFA examination
  2. Cheating on any examination
  3. Not following the CFA exam administration rules
  4. Providing confidential exam information to candidates or to the public
  5. Circumventing (or attempting to circumvent) security measures designed to protect the integrity of the CFA exams

This Standard does not prevent the free expression of opinions (i.e. criticism) regarding the CFA Institute or the CFA examination process.

Standard VII-B: Reference to CFA Institute, the CFA Designation and the CFA Program

When referring to CFA Institute, CFA Institute membership, the CFA designation or candidacy in the CFA Program, Members and Candidates must not misrepresent or exaggerate the meaning or implications of membership in CFA Institute, holding the CFA designation, or candidacy in the CFA Program.

Reasoning behind Standard VII-B
This Standard exists primarily to promote and protect the CFA as a unique brand name. It reinforces the principle that the CFA charter represents a significant high-level achievement to those who are able to successfully navigate the program. It recognizes that the Chartered Financial Analyst designation has tremendous value with regard to enhancing one's professional credentials and resume; therefore, it requires the CFA charterholders to not cheapen what they have achieved by promoting the designation in a certain way.

Some specific dos and don'ts are offered to guide CFA candidates when studying the proper application of Standard VII-B, though it's one of those guidelines that is open to some interpretation. It's difficult to say just what constitutes a less than "proper" or "dignified" or "judicious" use of the words "Chartered Financial Analyst". What might seem like good, honest, straightforward self-promotion and enterprising behavior to one person might come across as tacky and undignified in the eyes of another. Some of these words have changed in the revised Standards.

The Level I exam is likely to test you on the basics - i.e. what a person definitely can or cannot do with the CFA designation. At Levels II and III, where explanations need to be written out in essay form, a candidate will have room to interpret and examine both sides of a less-than-obvious violation.

Standard VII-B allows for an accurate explanation of the requirements that have been met to be a CFA Institute member or a CFA charterholder, though the Standard does not actually describe what those requirements might be.

Why not? In our opinion, this is done to give some additional flexibility to the CFA Institute; that is, if it wished to change the requirements, then it wouldn't need to change Standard VII-B. For example, there have been initiatives in recent years to require all CFA members, as a condition of continued active membership, to fulfill an annual CE (continuing education) requirement, which members might fulfill in a number of ways (e.g. attending a seminar, reading material, participating in a webcast). The proposed initiative was voted down in its most recent form, though it may eventually be adopted in some other form in the future (we should note that a CE program is in place, but participation is not mandatory for members).

According to Standards in effect January 2006, the right to use the Chartered Financial Analyst designation is granted to those satisfying the following requirements:

1.Successful completion of the CFA Program

2.Ongoing commitment to the CFA Institute's Professional Conduct Program. The key part of this program is that, every year, all CFA members are required to sign a Professional Conduct Statement and return it to the CFA Institute. On the Statement, the member must disclose all ethical violations or else state (and attest to the fact with a signature) that he or she has had no such violations.

3.Maintenance of active membership in the CFA Institute. Annual dues are required to keep one's membership active.

In other words, even for those who have completed the rigorous CFA Program, any failure to pay annual dues or sign the annual Professional Conduct Statement (which is usually done when paying dues) results in the suspension of the right to use the CFA designation.

Suspension means that it is an ethical violation (of Standard VII-B) to hold oneself out as a CFA charterholder:

1.The designation "CFA", or "CFA Charterholder", or "Chartered Financial Analyst" must be removed from business cards, brochures or any published material, and may not be used on a resume.

2.Any stated reference to oneself as a current, active or practicing CFA charterholder must be avoided.

3.The actual CFA charter may not be displayed in an office or work environment.

At Level I of the CFA Program, expect the exam questions to emphasize the guidelines that cover CFA candidates. Those sitting for the Level I exam are generally new to the CFA Program, and they will be candidates for a minimum of three years. In other words, while any part of any Standard is fair game on the exam, the guidelines from the third section of this Standard might be an area of focus. In particular, you should know these two important rules:

4.There is no partial designation for successfully completing any level of the CFA Program. One may merely state, "I have completed Level I of the CFA Program", but until all three levels are completed, one is considered a candidate.

5.To be regarded as an active candidate, one must be currently enrolled with the intention of sitting for the next scheduled exam. It is a violation to sign-up once, then sign-up again 20 years later, and continue to refer to oneself as a CFA candidate.

Applying Standard VII-B
First and foremost, know the correct and incorrect uses of the Chartered Financial Analyst designation.

The CFA Institute has published a "Guide for CFA® Charterholders online:

Weblink 1.5
Guide for CFA® Charterholders

The following is a brief summary of the points within CFA Institute's online guide, along with our own tips to remember for your upcoming exam:

a) "CFA" and "Chartered Financial Analyst" are to be used as adjectives, not as nouns or common names. In other words, it's improper to say, "I am one of three CFAs in our research department", or, "Today's speaker is a Chartered Financial Analyst". It's proper to say, "I am one of three CFA charterholders in the research department", or, "Today's speaker has earned the right to use the Chartered Financial Analyst designation". Yes, this involves using more words; it doesn't seem logical; no one does it that way; you've heard people use CFA as a noun ... we understand! But on the exam, you'll be expected to pick out examples of where "CFA" is being used as a noun. If you know that it's improper, you'll score easy points.

b) Always capitalize "CFA", and don't use periods after "C", "F" and "A". It's "Sam Jones, CFA", not "Sam Jones, cfa", or "Sam Jones, C.F.A."

c) Don't create new words and phrases. There's no such thing as a Canadian CFA or a CFA style of managing money. A firm's research process doesn't employ Chartered Financial Analysis.

d) The designation cannot be used as a part of a firm's name. "Acme Chartered Financial Analysts, LLC" is a violation.

e) In writing, the designation should not appear larger than other text or bolded. We can't display "Brian Spears, CFA" on business cards. The font needs to be consistent.

Look Out!

Candidates: Do Not indicate an expected completion date. Stating a date would be tempting to do on a job resume (e.g. "CFA Charter expected to be awarded in 2007"). This is often done when showing degrees in progress - i.e. resumes for MBA students typically show the expected completion date. However, the CFA is not a degree. It is proper to state when a given level was completed (e.g. "Level I completed in 2005").

Other questions may arise when considering whether real-life situations violate Standard VII-B:

1.Can a firm promote the fact that one of its employees has been awarded the CFA designation? To be consistent with the Standard, we would say that it's permissible to do so, but only if it's limited to the facts and covering the requirements - i.e. that the CFA Program requires three six-hour exams, taken over a minimum period of three years, covering topics ranging from ethics to economics to asset valuation to portfolio management. Describing membership in a local society or in the CFA Institute follows similar guidelines - i.e. it requires a basic description of the requirements to be members of those organizations. Anything that appears outlandish or shamelessly self-promoting is likely a violation.

2. Can a firm promote the fact that an employee passed the three exams on the first try? This line of promotion would exceed permissible guidelines and be a violation of the Standard. Just as there is no partial designation for candidates at Level II or III, there is no super designation for those passing all exams the first time.

3. Can advertising imply that CFA charterholders will help achieve superior investment results? No. This is a violation of the Standard and considered excessive and inappropriate.

4. If a CFA charterholder resigns his or her position, does he or she retain the right to use the CFA designation? For these situations, look to see whether the individual in question has paid annual dues and filed a Personal Conduct Statement. If so, he or she is a CFA charterholder in good standing. However, a failure to meet these requirements means that a member is inactive, and if the CFA designation is being used on business cards or on a resume, or in conversations with clients, potential clients or other professional colleagues, it is a violation. Active membership is suspended when dues are not paid, but it can be reinstated so long as the individual resumes requirements of active membership (pays dues and files the Personal Conduct Statement).

5. Are retired CFA charterholders (who no longer pay CFA Institute dues) not permitted to make any reference to their CFA accomplishment? A firm could honor a retired member and state the year in which he or she was awarded the CFA charter, as it is a dignified statement of fact and does not imply that the retired member is active and practicing.

How to Comply
Many of these procedures were touched on earlier, but to summarize:

  • For business cards, directory listings, company letterhead and any correspondence, use the mark "CFA" or the words "Chartered Financial Analyst", separated by a comma after the individual's name and in the same font type and size as the name.
  • All explanations, descriptions, promotions, advertisements, presentations or information regarding the Chartered Financial Analyst Program - what it is and who received it - should describe concisely the requirements to obtain the right to use the CFA designation and describe concisely the CFA Institute.
  • The right to use the designation is suspended when annual dues are not paid and the Professional Conduct Statement (PCS) is not filed. Under inactive or suspended status, individuals can no longer use the designation after their names or refer to themselves as a holder of the CFA designation. However, it is permissible for inactive members to state the year in which the CFA designation was awarded and the years in which status was active (i.e. the years in which they paid dues and submitted a PCS).
  • CFA candidates can properly state, "I am a Level I (or II or III) candidate in the CFA Program." However, to make this declaration, they must be enrolled to take the next scheduled exam. If they are not currently enrolled, they should state, "I passed Level I (or II or III) of the CFA Program in the year ____." Alluding to an expected completion date is not permitted.
  • Inform legal, compliance, public relations and marketing departments, in writing, on the scope of this Standard and provide examples of permitted conduct and examples of violations.
Disciplining CFA Members

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