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CFA Level I · CFA Level I Exam

Guidance for Standard V: Investment Analysis, Recommendations, and Actions

Standard V covers how you build and share investment views. V(A) requires diligence, independence and a reasonable basis for every recommendation or action. V(B) requires clear communication of process, limitations and risks. V(C) requires keeping records that support your work. To solve questions, match the facts to the sub-standard, then pick the action that follows its duty.

What this chapter covers

Standard V is the part of the CFA Institute Code of Ethics and Standards of Professional Conduct that governs the work itself. It asks three things. Did you do enough homework before you recommended or acted? Did you tell clients what they need to know? Can you prove what you did later? The three parts are V(A) Diligence and Reasonable Basis, V(B) Communication with Clients and Prospective Clients, and V(C) Record Retention.

The chapter is applied. You will not be asked to recite long text. You will read a short scenario and decide whether a Standard was met, which one applies, or what the member should do. Typical scenarios involve relying on a vendor's research, a team issuing one rating, a report that blurs fact and opinion, or a member who deletes files when changing jobs.

Standard V connects to the rest of the paper in two ways. It sits in the Ethical and Professional Standards topic, which is among the most heavily weighted areas on the exam (10-15% under the 2027 weights). It also links to other Standards. Fact versus opinion overlaps with I(C) Misrepresentation. Suitability links to III(C). Record keeping links to the supervisory duties under IV(C). Read these links as a set, not in isolation.

Ethics is among the most heavily weighted topics at Level I, at 10-15% under the 2027 weights. Every question is worth the same, with no penalty for wrong answers. Standard V questions are very learnable because the duties are few and the wrong options usually break one clear rule, such as relying blindly on a third party, hiding limitations, or discarding records. Time spent here gives dependable marks. It also trains the elimination skill you need on all three-option questions: find the option that fails the Standard's wording, and remove it.

Guidance for Standard V: Investment Analysis, Recommendations, and Actions: topics in the order to study them

  1. 1Standard V(A): Diligence and Reasonable BasisThis is the core duty, and the other topics apply or support it, so learn it first.
  2. 2Using Secondary and Third-Party ResearchIt tests V(A) in its most common exam setting: what you must check before relying on someone else's work.
  3. 3Group Research and Decision MakingIt extends diligence to teams, including when a member may stay associated with a group view and when to dissociate.
  4. 4Standard V(B): Communication with ClientsOnce you know how to form a sound basis, you learn how to share it: process, limitations, risks, fact versus opinion.
  5. 5Standard V(C): Record RetentionIt is the shortest duty and easy to learn after the others, since records support both diligence and communication.
  6. 6Application of Standard V: Cases and ComplianceFinish with cases and compliance practices so you can test all three sub-standards together under exam conditions.

How to prepare Guidance for Standard V: Investment Analysis, Recommendations, and Actions

Standard V rewards understanding of duties over memorising text. Aim to recognise the duty in a short scenario and choose the action that satisfies it.

  1. Read the official wording of V(A), V(B) and V(C) once, slowly. Write each in one sentence of your own.
  2. For each sub-standard, list the key duties from the Guidance: what you must do, what you should do, and what breaks the rule.
  3. Study third-party and group research with a simple test: did the member check the quality and assumptions, or just trust the source?
  4. Practise sorting scenarios by Standard. Before reading the options, name the Standard that applies and what a compliant member would do.
  5. Do mixed question sets with other Standards, since the exam does not label topics. Watch for overlaps with I(C), III(C) and IV(C).
  6. For every wrong answer, write which word in the Standard the option broke. Review this list a day later.
  7. In the last week, redo only the questions you missed, aiming for quick, confident elimination of two options.

Common mistakes in Guidance for Standard V: Investment Analysis, Recommendations, and Actions

  • Assuming a well-known research provider can be trusted without checking.

    Fix: Remember V(A) needs you to judge the quality and assumptions of the work. Reputation alone is never enough.

  • Treating V(B) as only about disclosing risks.

    Fix: Cover all of V(B): process, limitations, risks, factors used in analysis, and the split between fact and opinion.

  • Thinking a member must always leave a group whose research they disagree with.

    Fix: Separate the two cases. If the member believes the group view has a reasonable basis, they may stay associated with it. If they believe it lacks a reasonable basis, they should ask to have their name removed from the report.

  • Believing records belong to the analyst who made them.

    Fix: Records are the firm's property. Taking them to a new employer needs permission.

  • Mixing up V(A) with III(C) Suitability.

    Fix: V(A) asks whether the recommendation has a sound basis. III(C) asks whether it fits the client's circumstances.

  • Choosing the most extreme or most cautious option automatically.

    Fix: Pick the option that matches the Standard's actual duty. Re-read the stem for the facts that decide the answer.

Last-day revision: Guidance for Standard V: Investment Analysis, Recommendations, and Actions

  • V(A): exercise diligence, independence and thoroughness, and have a reasonable basis supported by research or investigation.
  • V(B): disclose the basic format and general principles of your investment process, and any changes that could affect it.
  • V(B): tell clients and prospects about significant limitations and risks of the process and the recommendation.
  • V(B): use reasonable judgment on which factors to include, and separate fact from opinion.
  • V(C): maintain records that support your analysis, recommendations, actions and communications.
  • Where no regulation sets a retention period, the Guidance recommends keeping records for at least seven years. Seven years is a recommendation, not a rule. Follow a longer legal period where one applies, and keep records in a form that can be retrieved. Records belong to the firm, not the member.
  • Using third-party research: you must check its quality and assumptions, not just trust the name of the provider.
  • Group research: a member who believes the group view has a reasonable basis may stay associated with it. A member who believes it lacks a reasonable basis should ask to have their name removed from the report.
  • Firms should have written policies for research review, so a reasonable basis does not depend on one person.
  • Changing jobs: do not take records or files without the former employer's permission.
  • Fact versus opinion: label forecasts and views clearly as such, so the client can judge them.
  • Elimination tip: reject options that rely blindly on others, hide risks, or discard records.

Guidance for Standard V: Investment Analysis, Recommendations, and Actions practice questions

Guidance for Standard V: Investment Analysis, Recommendations, and Actions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Guidance for Standard V: Investment Analysis, Recommendations, and Actions: frequently asked questions

What does Standard V cover in the CFA Level I exam?

It covers three duties: V(A) Diligence and Reasonable Basis, V(B) Communication with Clients and Prospective Clients, and V(C) Record Retention. Questions are scenario-based and ask which duty applies or what the member should do.

How long should records be kept under Standard V(C)?

Where no regulation sets a period, the Guidance recommends keeping records for at least seven years. This is a recommendation, not a rule. Where local law requires a longer period, follow the law. Records are generally the firm's property, not the member's.

Can I rely on third-party research under Standard V(A)?

You can, but only after you have made reasonable efforts to confirm that the research is sound. Check the assumptions, the rigour of the method and the independence of the provider before using it.

How do I tell Standard V questions from other ethics questions?

Look for the member's analysis, recommendation or communication. If the issue is the quality of research, how views are presented, or what is documented, think Standard V. If it is fit with the client, think III(C); if it is misstatement, think I(C).