- 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
Fran Dew is an analyst at a large brokerage house. Her husband, John, is an equity salesman at the same brokerage house. John is holding a large position of stock in a company called QRE. QRE has performed very badly of late and John is battling to sell the stock. John calls Fran and asks her, as a special favor to him, please call some of her institutional clients and sell them large quantities of QRE. Fran does this and sells off a large quantity of stock to her clients. Has Fran violated the Standard I. (B) Independence and Objectivity?
A. Yes. Due to her relationship with John she must never sell any stock that he is holding.
B. Yes. This was an unethical practice since analysts must always be able to justify the recommendations that they make.
C. No. Fran owed this favor to her husband, due to their relationship.
Explanation: No matter the benefit to the firm or her relationship with her husband, Fran should never sacrifice her objectivity and independence. Fran may deal with John at the firm but not in a manner that may compromise her independence and objectivity. Fran should only recommends stocks to her clients that she is able to justify the purchase of.
User Contributed Comments 5
|szyrmer||the question does not say how she sold the stock, and it was unclear if she convinced the clients based on fundamentals or used other means.|
|Carter||The point is that she was not concerned with the objectives and goals of the client. She was concerned with helping John our by selling some stock. Primary duty is to client.|
|sarath||Fran may deal with her husband...but no compromise with independence and objectivity...|
|malawyer||its funny that a sales guy must call an analyst for selling stocks, thats a new one ;-)|
|jayj001||I would have thought selection B is related to Standard 5A Diligence and Reasonable Basis. I can't see the connection between this answer and 1B Indepence and Objectivity, as stated in the question. Thoughts?|