CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Lawren Rowe, CFA, is an equity analyst at Leiman Securities. He receives an assignment to analyze Skogland Corporation, a stock owned by several of Leiman's clients. Rowe completes a thorough fundamental analysis of Skogland. Given his analysis and the sharp rise in the company's stock price during the past year, Rowe concludes that the shares are substantially overvalued. After the report is approved by Rowe's supervisor, but prior to the release of the report, Rowe calls his brother-in-law to suggest that he sells his Skogland shares immediately. Rowe's brother-in-law informs him that he has already disposed of his holdings in Skogland. Has Rowe violated any Standards?
A. Loyalty, Prudence, and Care: Yes; Reasonable Basis: No
B. Loyalty, Prudence, and Care: Yes; Reasonable Basis: Yes
C. Loyalty, Prudence, and Care: No; Reasonable Basis: No
Explanation: By communicating this information to his brother-in-law prior to release of the report, Rowe failed to put the firm's clients' interests above his own. Nothing in the question indicates that he did not have a reasonable basis for his recommendation; he conducted a thorough fundamental analysis and his report was approved. The fact that Rowe's brother-in-law had already disposed of the shares does not negate the fact that Rowe violated a duty to the firm's clients.

User Contributed Comments 1

User Comment
vinoth84 is that not 'Priority of Transactions'?
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