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Basic Question 4 of 15
The corporate finance department of an investment banking firm decides to compete for the business of ETV Corporation. Knowing that the brokerage department of the investment banking firm now has a "sell" recommendation on ETV, the director of corporate finance department writes a letter to the director of the brokerage department asking the recommendation to be changed to "buy." According to CFA Institute's Standards of Professional Conduct, which of the following is the best action for the brokerage department to take?
B. Have the director of the corporate finance department review the recommendation for the stock rating to ensure its accuracy.
C. Change the recommendation to "buy" only after receiving written direction from the director of the corporate finance department.
D. Remove ETV Corporation from the research universe and put it on a restricted list giving only factual information about the company.
A. Assign a new analyst to decide if the stock should receive a "buy" recommendation.
B. Have the director of the corporate finance department review the recommendation for the stock rating to ensure its accuracy.
C. Change the recommendation to "buy" only after receiving written direction from the director of the corporate finance department.
D. Remove ETV Corporation from the research universe and put it on a restricted list giving only factual information about the company.
User Contributed Comments 16
| User | Comment |
|---|---|
| kalps | Well this is obvious and intuitive i guess |
| TheProfet | Given the narrow nature of how the fact pattern is written, 'D' is the best answer. One has to be careful not to add more to the fact pattern (no matter how intuitive it may seem) in order to make one of the answer choices fit. |
| Slothrop | Although I chose D, I am not sure why A is such a bad answer. A seems to suggest that the analyst can still decide not to give ETV a buy recommendation after some analysis. The only thing that is odd is the assignment of a "new" analyst, but it is not clear to me that assigning a new analyst breaks the Standard if that new analyst exercises independent professional judgement in coming up with their recommendation. |
| fahad | I agree with Slothrop. I was confused between A adn D but ultimately chose D since A suggests that the analyst who came up with the 'sell' recommendation was not right which is not necessarily true. |
| JVAC | A is definetely wrong! if you think that stock should be a "buy" why didn't you assigned other analyst to make a new research of that company? |
| eabm80 | well A is wrong for one reason , if the first analyst got the opinion ( Sell ) & the NEW Analyst got the opinion ( buy ) they will have a conflict , so best action is to go with D |
| epizi | I think A is wrong because it is not stated that the first analyst did not do his job well, so suggesting another analyst is in effect signs of minning datas to come out with the required expectation of the ETV corporation which is misleading. |
| sanyukta | same as epizi, u wud be encouraging data mining.. we can always find some far-fetrched reason to recommend a buy on it, A is a definite no-no |
| TammTamm | I believe D was the best answer also. After reading all the choices several times, it was the only one that seemed feasible. |
| ggupta | THE ISSUE OF FIREWALLS. How can one department affect the recoomendation made by the other department for the benefit. The compliance department should suggest option"D" |
| got2pass | 'A' would be wrong because it would have the bad influence on the new analyst...kinda moving the wrong task on a different analyst than the previous one |
| ljamieson | A and B are plausible, but not BEST. |
| shaiara85 | The key word is "best" - A I suppose could be an option...but it's not the best response. |
| raffrobb | Thanks for reminding me that BEST answer is needed, I almost picked B, then decided D. Best Answer...Best Answer...Best Answer |
| Inaganti6 | I(B) is violated no ? |
| Obaid99 | Data mining doesn't mean that you are looking for an answer that you want. Giving bad rep to Data mining |
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Martin Rockenfeldt
Learning Outcome Statements
demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues of professional integrity
recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct
identify conduct that conforms to the Code and Standards and conduct that violates the Code and Standards
CFA® 2024 Level I Curriculum, Volume 6, Module 3.