The readings and Learning Outcome Statements (LOS) are out for the 2015 CFA curriculum and there have been some significant changes. Make sure you download the curriculum outline and new LOS from the CFA Institute website.
The most surprising change has been a modification of the topic area percentage weights on the exams. The previous topic weights had been the same for years, before I was a candidate, and no one really saw the changes coming. The actual changes are relatively marginal but still surprising.
Level 2 Changes
The topic weight for Ethics & Professional Standards has increased from a fixed 10% weight to a range of 10% to 15% on the exam. The range on Financial Reporting & Analysis has been tightened to 15% to 20% of your exam score, slightly decreasing its potential importance from a high of 25%. The importance of Equity Investments has also decreased with a new weighting range of 15% to 25%, from 20% to 30% previously. The range on Alternative Investments decreased to 5% to 10% (5% to 15% previously) while the range for Fixed Income Investments increased to 10% to 20% (from 5% to 15% previously).
There are six new readings to the Level 2 exam (one in FRA, one in Corporate Finance and four in Fixed Income) while 10 readings have been removed (two in Ethics, two in FRA, one in Alternative Assets and five in Fixed Income).
(20) Evaluating Quality of Financial Reports
(25) Corporate Performance, Governance and Business Ethics
(42) Term Structure and Interest Rate Dynamics
(43) Arbitrage-Free Valuation Framework
(44) Valuation and Analysis: Bonds with Embedded Options
(46) Introduction to Asset-Backed Securities
(3) CFA Institute Soft Dollar Standards
(10) Prudence in Perspective
(22) The Lessons We Learn
(23) Evaluating Financial Reporting Quality
(43) Investing in Hedge Funds: A Survey
(46) Term Structure and Volatility of Interest Rates
(47) Valuing Bonds with Embedded Options
(48) Mortgage-Backed Sector of the Bond Market
(49) Asset-Backed Sector of the Bond Market
(50) Valuing Mortgage-Backed and Asset-Backed Securities
The Ethics & Professional Standards topic has gotten a little easier with the removal of some supplementary readings. You still have the case studies but almost all the material is a repeat of what you saw at the Level 1 curriculum. The new edition of the Code and Standards is not materially different from the previous edition. Some of the standards have been modified to include a more proactive requirement, i.e. the need for supervisors to take positive steps to promote compliance rather than just prevention. The new chapter on ‘Ethics and the Investment Industry’ provides a strong argument for ethical conduct and integrity of the markets.
If you compare last year’s readings with the 2015 readings, you’ll notice that many have been changed rather than necessarily added or dropped entirely. This is good news for repeat candidates since it means that the LOS have not changed as dramatically as the readings. Of all the changes, I would probably pay the most attention to Fixed Income. The readings have been changed significantly and the topic weight on the exam has increased as well.
The common belief is that there is a higher chance of new material, i.e. new readings, appearing on the exams. I am not sure this is true or if it is even intentional by the Institute if it does happen. I would still recommend focusing on those topic areas with the most weighting whether they include new readings or not. The Level 2 CFA exam is all about the details and formulas. Where the Level 1 exam was about ‘why’ things are done, the Level 2 exam is about ‘how’ they are done so make sure you are able to work through formulas and processes.
‘til next time, happy studyin’
Joseph Hogue, CFA