- CFA Exams
- CFA Exam: Level I 2021
- Study Session 1. Ethical and Professional Standards
- Reading 3. Guidance for Standards I-VII
- Subject 2. Standard I (B) Independence and Objectivity
CFA Practice Question
There are 361 practice questions for this study session.
CFA Practice Question
Glassia Red is making a presentation to the firm BB, seeking investment banking business. During the presentation she offers to start coverage (generate research reports) of the firm. If BB agrees to provide Glassia with investment banking business on the understanding that Glassia's firm will begin coverage, ______.
A. Glassia would not have violated the Standards as long as the research reports were objective.
B. Glassia would have violated Standard I (B) Independence and Objectivity.
C. Glassia would not have violated the Standards as long as she discloses to BB what the report will say prior to receiving the investment banking business.
Explanation: Glassia using the prospect of research coverage as an inducement for investment banking business does not imply that the research reports will not be objective.
User Contributed Comments 9
|gazman1984||No, might be a rather large incentive to bias them though. Seems corrupt to me|
|showmethemoney||agreed. aint the ibanking fee pretty large?|
|majormingzhao||I thought that if a research is to be conducted, it shouldn't matter if the target being analysed is a client of the research facility or not. I mean, the ibank can and should be able to do research on any of firms it want.If the research is done based on a request of a client, isn't that not objective?|
|Mikehuynh||A bit blur. Anyway have to select the best answer|
|gill15||This is pretty straight forward. This does not affect her objectivity. BB did not say that it will only hire her if there is Optimistic research. it is independent of her research results.|
|trugunna||If the IB business is CONTINGENT on the research report then this definitely would be a violation.|
|NickGerli||While I don't think the relationship precludes Glassia from doing the research reports, doesn't she need to disclose her relationship with BB in the report?
The question makes no mention of her doing that, which is why I chose B.
|Benn09||Her making a presentation to get business, and then getting business isn't a conflict of interest.
How else is she supposed to market her services.
If they hired her solely to receive a good report that would clearly be a conflict, but there is no mention of that. And trying to get business isn't a relationship that she needs to disclose I don't think.
I.E. -- If she called their office and said what her services were, and they agreed to hire her, I don't think she needs to disclose the fact that one time she called them
|mkunkel28||The fact that she hasn't even begun the report and will start generating the report after she gets her answer makes no sense to me.|