The Investment Advisor Body of Knowledge + Test Bank - IMCA

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an “exam prep” resource or guide that covers exactly what you'll see on your exams, as that is not the purpose of this work. The text is, however, organized as a comprehensive resource designed to cover key concepts and applications found in the CIMA Core Topics List at an appropriate level of depth.

      The CIMA Content

      The content found in the following readings defines, discusses, and explains the core topics and learning objectives found in the CIMA Core Topics List used as a blueprint for the CIMA qualification and certification exams.

      The CIMA Core Topics List includes content divided into six domains, including:

      I. Governance

      IMCA's Code of Professional Responsibility and industry regulation are reviewed.

      II. Fundamentals

      Key concepts and applications in statistics, the time value of money, economics, and global financial markets are described and explained.

      III. Portfolio Performance and Risk Measurements

      Authors define and discuss risk attributes, risk measurements, performance measurement, and attribution. Concepts are explained and mathematical formulae are used to walk readers through quantitative methods and analysis.

      IV. Traditional and Alternative Investments

      These readings include descriptions of various equity and fixed income investments such as stocks and bonds, various fund structures (such as mutual funds, exchange-traded funds, and hedge funds), foreign exchange, alternative investments, options, futures, and other derivatives. This section also includes a chapter covering technical analysis.

      V. Portfolio Theory and Behavioral Finance

      Modern Portfolio Theory (MPT), and research and theories considered Post-MPT are explored and debated. Key concepts such as mean variance optimization (MVO), the efficient frontier, the Capital Allocation Line (CAL), diversification, the Capital Asset Pricing Model (CAPM), and the Arbitrage Pricing Theory (APT) are all discussed in detail.

      VI. Investment Consulting Process

      The last section of this textbook reviews client discovery, the investment policy statement (IPS), portfolio construction methodology, risk management, and manager search and selection for those employing active managers and/or strategies. Tax-aware (tax-efficient) investment strategies are also explored.

      This textbook is organized using these six domains and the 21 chapters to line up directly with the 21 sections that can be found under the six domains in the CIMA Candidate Handbook. There are approximately 111 core topics and 525 line items, per the CIMA exam content blueprint.

      Please note that IMCA-specific documents found in this text (e.g., CIMA Core Topics List, IMCA Code of Professional Responsibility, IMCA Standards of Practice, IMCA Performance Reporting Standards, IMCA Disciplinary Rules and Procedures, and IMCA Guidelines Regarding the Acceptance of Benefits from Third Parties) are subject to change; therefore we recommend candidates check IMCA's website at www.imca.org for the most recent version of these documents before testing.

      The CIMA Exams

      At the time of publication of this textbook, the CIMA qualification exam includes 60 multiple-choice questions given over a two-hour time period. The CIMA certification exam includes 110 multiple-choice questions given over a four-hour time period. Based on the core topics list, content from each of the six domains and each of the 21 subsections (chapters in this text) are tested on both exams. The primary differences in the two exams are in overall length, the topic coverage for each exam per the weightings identified in the core topics list, and in the cognitive level at which specific topics are tested. The certification exam should include questions that demand a higher level of cognitive skill and knowledge to answer correctly.

      Candidates should be familiar with IMCA's “Sample Formula Sheet for CIMA Certification” which may be downloaded from IMCA's website. All candidates will be given a copy of the formula sheet during the qualification and certification exams. Note however that each university may use a different formula sheet, or possibly no formula sheet, for their exam. Candidates should be familiar with all of the terms and formulas on this sheet, but keep in mind that some of these calculations may be expressed differently (e.g., ordering of figures may be different, different symbols may be used, etc.). Therefore, candidates should know each well enough to be able to make the necessary adjustments if any formula is expressed differently in readings or on their exams. In other words, learn how to use the formulas; do not simply memorize them.

      Candidates who report studying 100+ hours for the CIMA qualification exam and an additional 100+ hours for the certification exam demonstrate higher rates of success. Of course, the time needed to successfully comprehend and retain a sufficient amount of the material depends on several factors, including a candidate's existing knowledge and experience, study habits, focus, and determination.

      Good luck to all of you who are studying for your exams. We wish every success to all investment advisors and consultants in the field who are placing the needs of their clients first, constantly working to improve their own skills, and seeking to provide the best services possible. All the best.

      Additional Resources

      The following resource is available online at (www.wiley.com) to further assist CIMA candidates in their studies:

      ■ Quiz questions for each section

      Helpful Web Links

      IMCA – CIMA certification homepage: www.imca.org/cima

      CIMA certification process: www.imca.org/cima-certification-process

      CIMA study resources: www.imca.org/cima-study-resources

      CIMA registered education providers: www.imca.org/pages/registered-education-providers

      CIMA core topics: www.imca.org/pages/2014-CIMA-Core-Topics

      Notes

      IMCA® is a registered trademark and Investment Management Consultants AssociationSM and Certified Investment Management AnalystSM are service marks of Investment Management Consultants Association Inc. and denote the highest quality of standards and education for financial professionals. CIMA®, CIMC®, and CPWA® are registered certification marks of Investment Management Consultants Association Inc. Certified Private Wealth Advisor is a pending certification mark of Investment Management Consultants Association Inc. Investment Management Consultants Association Inc. does not discriminate in educational opportunities or practices on the basis of race, color, religion, gender, national origin, age, disability, or any other characteristic protected by law.

      Disclaimer: The CIMA Qualification and Certification Exam topics and exam weightings are taken from the CIMA Candidate Handbook as approved by the CIMA Certification Commission. IMCA's education department and the authors and editors of this manuscript have no knowledge of actual exam content. The material and content published in this manuscript are for educational review purposes only, and do not guarantee an exhaustive compendium of exam questions covered on the exams. The CIMA Certification Commission neither endorses nor recommends this material.

      CHAPTER 1

      IMCA Code of Professional Responsibility and Standards of Practice

      Investment advisors and consultants are responsible for following laws and standards enforced by numerous government agencies, industry self-regulatory bodies, and the firms at which they are employed. As a professional certification body, the Investment

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