CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Jake Smith, an analyst with a large brokerage house, analyses a company called DDM. He gives the company as a "buy" recommendation. He recently hears in the market that the company is going to experience difficult times ahead. He immediately changes his recommendation to "sell." Has Jake violated the Code and Standards?

A. Yes, because he did not have a reasonable and adequate basis for his recommendation.
B. Yes, because he should have changed his rating to a "hold" recommendation.
C. Yes, because market information is not always reliable.
Correct Answer: A

Members must perform appropriate diligent and thorough investigations in order to make an investment recommendation or to take investment action. Members must establish a reasonable basis for all investment recommendations and actions.

Jake did not establish a reasonable basis for all investment recommendations and actions.

User Contributed Comments 4

User Comment
Khadria "market information is not always reliable" might look correct but its NOT because the reason stated is not the ground why he has violated the standards. Reason in "A" is proper ground for violation.
dblueroom basically for someone to simply switch from buy to sell without any substantial basis is a violation.
johntan1979 Just for fun :)

theinvestmentinsight.files.wordpress.com/2012/05/book-buy-sell-sell-sm.jpg
raffrobb Diligence means unpacking and investigating for oneself.
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