CFA Society Toronto - Board


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Page 1 of 3 I. PURPOSE CFA Society Toronto (the Society) goals include professional and business development for members, advancement of the profession and especially ethical behavior within it, and promotion of the CFA Charter as the pre-eminent qualification in the finance services industry. OBJECTIVE Reserves are needed to protect the Society from financial volatility in revenues and expenses. Approximately 55% of the Society revenues are from membership dues while another 15% comes from job posting services. Payroll and rent account for over 50% of total budgeted operating expenses. Membership in the Society is voluntary although the "retention rate" has historically been very high (>95%). Job placement services revenue has been growing steadily over the past few years but is very susceptible to any downturn in the financial market operations (and/or reduce operations in an orderly manner, if necessary) in response to a change in the external environment. In a severe economic downturn, the TCFAS could lose 20-40% of its members and all of its job placement revenue. Both of these equate to approximately $500-$700K of 2014 projected revenues. In such a circumstance, where the Society had fewer members, candidate education revenue would also decline and, as a result of lower cash inflows, interest income would also decline. II. BACKGROUND The initial reserve policy was established with the following key components 1. Comparative levels of reserves A review of the investments of similar professional non-profit organizations showed that investments as a percentage of total assets ranged from 12% to 75% with a concentration in the 50% range and investments as a percentage of operating expenses ranged from 9% to 123% with a large number in the 50% to 75% range. It was determined that the Society's investments were high in comparison to other organizations but not unreasonable. 2. Periodic adjustment to reserves It was determined that absent any other decision, the reserves should be adjusted annually to meet the above recommended parameters. An updated comparison of the Society's level of investments and reserves at December 31, 2012 has indicated that our policy limits continue to be reasonable in relation to comparable entities but that our level of unrestricted reserves appears to be quite low. The following are adjustments to the Policy as a result of most current information and long-term practicality of the Policy. CFA Society Toronto Board Manual 2016 Page 84 of 194

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