- CFA Exams
- CFA Level I Exam
- Study Session 1. Ethical and Professional Standards
- Reading 3. Guidance for Standards I-VII
- Subject 1. Standard I (A) Knowledge of the Law
CFA Practice Question
You are the Senior Analyst at an investment bank which is in the process of underwriting a firm's primary stock offering. However, through in depth analysis, you discover that the firm whose stock your bank is underwriting is experiencing severe cash flow problems that could lead to it becoming insolvent. This fact is NOT mentioned in the prospectus. What should you do?
A. You should notify potential investors with respect to the problem.
B. You should ignore the information due to its sensitivity.
C. You should report the issue to your supervisor.
Explanation: A member's responsibilities with respect to fundamental responsibilities are clearly set out in the statement below. The other solutions provided are not detailed in this standard.
A member who is aware of a misleading statement relating to a prospectus must follow the following procedures:
- Report the misleading statement to the supervisor.
- If the supervisor does not dissociate, then the member must sever all connections to the client.
- The member should seek legal advice.
User Contributed Comments 6
User | Comment |
---|---|
Dinosaur | i suppose senior analysts have supervisors too |
ElCarnal | Yes why do they insist on SENIOR? It made me think he was in charge of the whole thing and therefore couldn't report to any supervisor. |
uhupong | I work at state street investor bank and here is our hierarchy Associate 1 Associate 2 Senior Office Assistant Vice president Vice president Senior Vice president Executive Vice president Vice Chairman President chaimand & CEO |
atemple315 | Yup - a senior analyst is fairly low down on the pecking order in most investment banks.... |
Shaan23 | What if you're the supervisor? |
hon132 | Notify the guy who supervises you and if you're the president, tell Congress you did nothing wrong and resign quietly with the parachute |