- 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
The CEO of a large brokerage house informs one of the analysts that he should change his opinion from a "sell" to a "buy" on company RDE, since the CEO of RDE is a good friend of the CEO of the brokerage firm, and is not happy with the sell recommendation out on his company. What should the analyst do?
A. Refuse to report on the company any further.
B. Refuse an opinion on the company and only release factual information about the company.
C. Have his supervisor review the opinion, and then make the change to a "buy" if the supervisor agrees.
Explanation: Members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action. Consequently, the analyst should not change his opinion to a "buy" irrespective of whether his supervisor reviews the report.
User Contributed Comments 17
|jimcrock||But why is the conclusion that only factual information should be produced thereafter? Refusing an opinion at least gets the person who wanted to put down a buy closer to what they wanted - it's better than a sell.|
|halu||How can an analyst only present factual Information?He is supposed to give an opinion. hence it would be better if the analyst in this case refuses any opinion|
|Quan||he was going to release a "sell" recommendtion. Now because of the pressure from the CEO, he is going to "refuse any opinion"? Isn't this a violation?|
|surob||Factual information? I agree with halu. He should provide buy or sell recommendation.|
|surob||or refuse to issue any recommendation|
|jmcarr02||Instead of producing a biased report on the company, the analyst produces an incomplete report and thus partially accomplishes his job, instead of not doing it at all as suggested by the answer (A)! Lol...|
|jmcarr02||It's part of his duty towards his employer to accomplish his job.|
|vadklim||I think it would be also more fair from the position of avoiding conflicts of interests if he refuses to report on the company further.|
|micheleus||I think A is a best answer because if you release only factual information, it will be a signal for customer to suspicion about your report (and maybe think as a "sell" signal)|
|Surgiey||You are right|
|LloydBraun7||Factual information about the company......isn't that what Wikipedia is for?|
|bc9115a||is this tricky or is it a bad question?|
|gill15||This makes little sense to me as well. I would think you would have to dissasociate yourself but I guess since it is NOT a legal matter it's not necessary. But I would at least expect no opinion at all because even factual information when selective can be made to sound favorable. this is nonsense.|
|ars2011||I disassociate myself from this Question
|tomalot||I refuse to give an opinion, the question and answer (as provided by AnalystNotes) is set out above.|
|janis36||the factual information is that AN does not give two shs about your opinion.|
|ChirsMitch||Your recommendation of "buy" or "sell" is already an opinion. It's your opinion backed up by (hopefully) careful analysis but it's still an opinion and has no bearing on what the stock will actually do.|