CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

Doe, a CFA candidate, is a junior research analyst with Howard & Sons, a brokerage and investment banking firm. Howard's mergers and acquisitions department has represented Britland Company in all its acquisitions for the past 20 years. Two of Howard's senior officers are directors of various Britland subsidiaries. Doe has been asked to write a research report on Britland. What is Doe's best course of action?

A. Doe may write the report but must refrain from expressing any opinions because of the special relationships between the two companies.
B. Doe should not write the report because the two Howard officers are "constructive insiders."
C. Doe may write the report if she discloses the special relationship with the company in the report.
Correct Answer: C

User Contributed Comments 4

User Comment
TheProfet Remember that as long as there is appropriate disclosure, such a report is ok. This question presents a unique situation in that while answer B. is attactive, it is overly conservitive and unnecessecary if Howard officers agree to disclose their special relation with Britland.
ggupta Agree with above.

The analysts are free to write reports so long they provide a fair disclosure of all the information that is causing or can cause the conflict of Interest. By proving appropriate disclosures, the analysts avoids risking his liability under section VI A
dblueroom In what case, it is recommended for analysts only provide factual information about the research subject when there is substantial conflict of interests?
geofin It's I(B) Independence and Objectivity standard:

"If the firm is unwilling to permit dissemination of adverse opinions about a corporate client, members and candidates should encourage the firm to remove the controversial company from the research universe and put it on a restricted list so that the firm disseminates only factual information about the company."

CFA Institute. Level I Volume 1 Ethical and Professional Standards and Quantitative Methods, 7th Edition. Pearson Learning Solutions. Page(32).
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