CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Jake Stan, a CFA Charterholder, is writing an unfavorable research report on a company called PKO. Larry Spelt, who is Jake's supervisor and who is NOT a CFA Charterholder, informs Jake that the firm is about to underwrite a large stock offering for PKO. Larry tells Jake to please upgrade his research report on PKO to reflect a purchase recommendation. Jake does this without disclosing the underwriting activity. According to the Standards of Professional Conduct, which Standard/s of Professional Conduct has/have been violated?

I. Standard V (A) Diligence and Reasonable Basis
II. Standard VI (A) Disclosure of Conflicts to Clients and Prospects
A. Both I and II
B. I only
C. II only
Explanation: Jake has changed his opinion on the stock and has not informed the firm about participation in the offering to clients. He has therefore violated Standard V (A) Diligence and Reasonable Basis and Standard VI (A) Disclosure of Conflicts to Clients and Prospects.

User Contributed Comments 8

User Comment
surob I cannot undestand why the disclosure is needed here. Any thoughts?
alki Company's underwriting activity should be disclosed in the research report
volkovv he technically could of informed the cleints about the reason of changing his reccomendation, that would satisfy disclosure of conflicts standard, but it would not justify his behavior, and he still would be in a violation of diligence and reasonable basis
krisscfa I. Standard V A - Diligence and Reasonable Basis.

This standard applies because she just changed the recommendation by listening to her supervisor and not doing a thorough research.


II. Standard VI A - Disclosure of Conflicts to Clients and Prospects:
This standard applies because the underwriting arrangement is not mentioned in the report.
typeR IF the underwriting arrangement is not mentioned, how does that affect Disclosure of CONFLICT.?
peteypete stop placing ifs and "technicallies" just answer the question with what you got! the firm is making money off of the underwriting. they make more if the underwriting is met with strong buying and do worse if there is less buying. best way to answer multiple choice is KISS just keep it simple
Benloper My hang up is that the underwriting is about to happen. If it were underway or had happened in the past I get it but prior to being announced could be material non-public information which would not be disclosed correct?
Shaan23 Disclosure to clients in the Conflicts of nature section is MDMC acronym from which I got it from MDMA cause I'm still in hippie mode.

M - Market making activitity(Firm has a special interest in the stock price)

This must be disclosed. All MDMA drugs you use must be disclosed to clients.
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