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.