- CFA Exams
- CFA Level I Exam
- 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
Harold Kilmer's boss instructed him to assume coverage of a stock and maintain a buy rating. If Harold were to do so, would this be ethical?
A. Only if the stock maintained a buy rating objectively. Harold's opinion must remain objective and independent.
B. If Harold's boss offers him a raise in order to bias his information, this is acceptable.
C. Because Harold's boss instructed him to be dishonest in order to maintain the buy rating, Harold can not ethically assume coverage of the stock.
Explanation: Maintaining a buy rating is ethical is if the stock maintains a buy rating objectively. Harold's opinion must remain objective and independent.
User Contributed Comments 3
| User | Comment |
|---|---|
| Downgrade | the fact that his boss pressured him to open at a buy is conflict enough. If someone outside the firm were to learn that his boss was pressuring him to do so his role to provide objective coverage would be compromised even if his research showed that the stock was the rating he gave it. |
| rjdelong | I agree with you downgrade, it would create the PERCEPTION of a conflict, seems like it would be choice C. |
| sushant19 | but it doesn't say he was explicatily "pressured" it's the wording - "assumed" |