A:

You may still pass the Chartered Financial Analysis (CFA) Level I even if you fare poorly in the ethics section, but don't count on it.

The CFA Institute has long emphasized that ethics is a particular area of focus for it. The seriousness with which the CFA Institute views ethics is evident from the fact that for exam candidates with borderline total scores, performance on the ethics section can mean the difference between passing and failing the exam. This is true for all three levels of the CFA and not just for Level I.

The FAQ section of the CFA Institute addresses this issue under a question that says "what is the ethics adjustment?" The CFA Institute notes here that when its Board of Governors instituted a policy to place particular emphasis on ethics, from the 1996 exams onwards, performance on the ethics section became a factor in the pass/fail decision for candidates with scores close to the minimum passing score (or MPS, which the Institute never publishes). It adds that this ethics adjustment can have a positive or negative impact on such candidates' final results. Most importantly, the CFA Institute confirms that this adjustment has had a net positive effect on candidate scores and pass rates in most exam sessions.

You can't ask for clearer evidence than this about the importance of the ethics section in the CFA exams. A good performance in ethics can push a candidate with a borderline score into the coveted group of "pass" candidates, while a poor performance in ethics can doom the borderline candidate to another year of strenuous study.

Therefore, it might be best to start your CFA studies with the ethics section. If you master ethics, it may well prove to be the swing factor in your favor if you do not fare as well as you had hoped in the exams. Another benefit of mastering ethics is that since much of the study material is similar across all three levels, a good grasp of it in Level I will give you a head start in preparing for Levels II and III. As well, learning to recognize and avoid ethical dilemmas is something that will stand you in good stead throughout your investment career. The bottom line is to put ethics first.

RELATED FAQS
  1. Are investments in the drug sector appropriate for ethical investors?

    Explore the question of whether investments in the pharmaceutical industry are appropriate for investors who wish to pursue ... Read Answer >>
  2. How have business ethics evolved over time?

    Learn about the evolution of business ethics over times, from the rise of social responsibility in the 1960s to ethics in ... Read Answer >>
  3. Is business ethics important in business profitability?

    Business ethics as a guiding philosophy within a company can have a drastic impact on long-term business profitability and ... Read Answer >>
Related Articles
  1. Financial Advisor

    Asset Manager Ethics: Acting Professionally and Ethically

    To aid managers in understanding the requirements for ethical and professional behavior, we offer some basic guidelines.
  2. Personal Finance

    An Introduction To The CFA Designation

    The CFA designation is seen as the key certification for investment professionals. Find out what the CFA signifies for candidates and investors.
  3. Personal Finance

    Prepare For Your CFA Exams

    Find out how to get yourself ready for these lengthy and often daunting exams.
  4. Financial Advisor

    Pass Your CFA Exams on the First Try

    Become one of the elite who pass the Chartered Financial Analyst exams on the first try by using these simple study methods.
  5. Personal Finance

    What To Expect On The CFA Level III Exam

    The Level III exam is one of the tougher exams for the CFA. Read this to give yourself a little insight.
  6. Financial Advisor

    Tips on Passing the CFA Level I on Your First Attempt

    Obtain valuable tips and helpful study instructions that can help you pass the Level 1 Chartered Financial Analyst exam on your first attempt.
  7. Financial Advisor

    Should Financial Advisors Pursue the CFA?

    There is a certain prestige that comes with obtaining your CFA, but is it needed?
  8. Personal Finance

    What To Expect On The CFA Level II Exam

    This article will help you understand the nuances of the CFA Level II exam.
RELATED TERMS
  1. Ethical Investing

    Ethical investing refers to the practice of using one's ethical ...
  2. Code of Ethics

    A code of ethics is a guide of principles designed to help professionals ...
  3. Chartered Financial Analyst (CFA)

    A Chartered Financial Analyst is a professional designation given ...
  4. Series 66

    An exam administered by the Financial Industry Regulatory Authority ...
  5. Series 63

    A securities license entitling the holder to solicit orders for ...
  6. Series 72

    The Series 72 is a FINRA licensing exam for individuals who want ...
Hot Definitions
  1. Capital Asset Pricing Model - CAPM

    Capital Asset Pricing Model (CAPM) is a model that describes the relationship between risk and expected return and that is ...
  2. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  3. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  4. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  5. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  6. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
Trading Center