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.

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