CFA Level I Exam · Guidance for Standard V: Investment Analysis, Recommendations, and Actions

Using Secondary and Third-Party Research Under Standard V(A)

Updated 7 October 2026 · Fact-checked

Standard V(A) requires you to exercise diligence, independence and thoroughness and to have a reasonable and adequate basis for recommendations. When you rely on research by others, you must make reasonable efforts to confirm it is sound: check its assumptions, rigor and independence, and understand any quantitative model you use. You stay responsible for the result.

Understand Using Secondary and Third-Party Research

Standard V(A) says members and candidates must exercise diligence, independence and thoroughness in analyzing investments, making recommendations and taking investment actions. They must also have a reasonable and adequate basis, supported by appropriate research and investigation, for each recommendation or action.

You rarely build everything yourself. You may use a broker's report, a rating agency's view, a vendor's data, a colleague's model or a consultant's study. The Standard allows this. But using someone else's work does not move your duty to them. You remain accountable for what you tell clients and what you do with their money.

The Handbook's guidance groups outside material in two ways. Secondary research is research done by someone else inside or outside your firm, such as a colleague's report or a report from another firm's analyst. Third-party research is research from an outside provider, such as a broker, vendor or independent research house. The line between them is not a heavily tested point. What is tested is the duty: before relying on either, you make a reasonable judgment about its quality.

The test is whether the research is sound enough to rely on. Ask whether the assumptions are realistic, whether the methods are rigorous, whether the analysis is thorough and whether the author is independent, with no conflict that could bias the view. Ask the same of a quantitative model. You need not rebuild it, but you should understand what it does, what inputs it uses, what it assumes and where it can fail, including how it behaves in stressed markets.

The more important the decision and the less familiar the source, the more checking you owe. Periodic review matters too. A provider that was reliable last year may have changed its methods, its staff or its incentives. A firm should also have a process to review outside research, and a member who sees a flawed process should raise it.

Key formulas to remember

Standard V(A) core duty: Diligence + Independence + Thoroughness → Reasonable and adequate basis; Applies to analysis, recommendations and investment actions. Use the Standard's wording in answers.
Test for relying on others' research: Reliance is acceptable only after reasonable efforts to confirm the research is sound; Check assumptions, rigor, thoroughness and independence of the provider.
Quantitative model due diligence: Understand inputs, assumptions, limits and stress behavior; You need not rebuild the model, but you must know its limits.
Responsibility rule: Using outside research does not transfer accountability; You remain responsible for recommendations and actions.

How to solve Using Secondary and Third-Party Research questions

Use this method on any V(A) question about research or models written by someone else.

1Identify who produced the work: you, a colleague, an outside firm, a vendor or a model.
2Ask what the member did before relying on it: nothing, a quick glance, or reasonable checks.
3Test the research on assumptions, rigor, thoroughness and independence. Look for conflicts such as a fee or relationship that could bias it.
4If it is a model, ask whether the member understood its inputs, assumptions and limits, including poor performance in stress.
5Check whether the member passed it on as their own work or relied blindly because the source is famous or cheap.
6Decide the violation or compliance: blind reliance without reasonable checks violates V(A).
7Pick the answer that names Standard V(A) and the action of making reasonable efforts to confirm soundness.

Quickest way: Blind reliance filter

When to use it: When two options look close and you have about 90 seconds.

Find the option where the member relied on research without any check. That is usually the violation.
Reject answers that say reliance is fine because the source is reputable, well known or paid for.
Reject answers that demand rebuilding everything. The Standard asks for reasonable efforts, not a full redo.
Choose the answer with reasonable checks of assumptions, rigor and independence.

Common mistakes in Using Secondary and Third-Party Research

Believing a reputable provider removes the duty to check.
Brand names feel safe, so students treat trust as diligence.
Fix: Reputation helps, but you must still make reasonable efforts to confirm soundness.
Thinking you must recreate all third-party research yourself.
Students overread 'thoroughness' as 'redo everything'.
Fix: The Standard asks for reasonable efforts. Review assumptions, rigor and independence, not rebuild from scratch.
Assuming responsibility moves to the author of the research.
It seems fair that the creator is to blame for errors.
Fix: You are accountable for your own recommendations and actions, whoever wrote the input.
Ignoring independence of the source.
Students focus on numbers and miss conflicts of the provider.
Fix: Ask whether the provider had a stake, such as a banking relationship, that could bias the view.
Using a quantitative model as a black box.
If the output looks precise, it feels reliable.
Fix: Understand inputs, assumptions and limits, and how the model behaves under stress.
Labeling the wrong Standard, such as V(B) or I(B), for a diligence failure.
Several Standards touch research and communication.
Fix: Failure to check the basis of a recommendation is V(A). Communication of the process to clients is V(B).

Worked examples

Example 1

An analyst at an asset manager reads a broker's report that rates a European utility 'Buy'. The analyst copies the target price into a client recommendation without reading the assumptions. The broker also underwrites the utility's bonds. Which is most accurate? A. The analyst complied, because brokers are professional researchers. B. The analyst violated Standard V(A) by not making reasonable efforts to confirm the research was sound and independent. C. The analyst complied, because the broker, not the analyst, owns the research.

Show the solution

The source is third-party research.
The analyst checked nothing: no assumptions, no rigor review.
The broker underwrites the issuer's bonds, so independence is in doubt and the analyst did not ask.
Standard V(A) requires a reasonable and adequate basis and diligence. Responsibility stays with the analyst.
A relies on reputation. C moves responsibility to the broker. Both are wrong.

Answer: B

Example 2

A portfolio manager uses a vendor's risk model to set position limits. She has not studied its assumptions and does not know how it performs in stressed markets. Under Standard V(A), what should she do? A. Keep using it, because the vendor is regulated. B. Stop using any quantitative model. C. Make reasonable efforts to understand the model's inputs, assumptions and limitations, including stress behavior, before relying on it.

Show the solution

The duty applies to quantitative models as well as written research.
She need not rebuild the model, so a full prohibition in B is too strong.
Regulation of the vendor does not replace her own diligence, so A fails.
C matches the Standard: understand inputs, assumptions and limits before relying.

Answer: C

Exam tips

Look for the phrase 'without checking' or 'relied solely'. It usually signals a V(A) violation.
Correct answers use 'reasonable efforts', not 'verify every figure' or 'rebuild the model'.
Expect scenarios with a conflicted broker or vendor. Independence is the hidden clue.
For models, the correct answer stresses understanding assumptions and limits, not just accuracy of output.
With three options, remove the extreme ones (blind trust and total rebuild) and keep the balanced one.

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

Using Secondary and Third-Party Research in other exams

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

Using Secondary and Third-Party Research: frequently asked questions

What is the difference between secondary and third-party research in the CFA Code and Standards?

Secondary research is work done by others, such as a colleague or another firm's analyst. Third-party research comes from an outside provider such as a broker or data vendor. The exam cares less about the label and more about your duty to check either one before relying on it.

Do I have to verify every number in a broker's report?

No. Standard V(A) asks for reasonable efforts to confirm the research is sound. You judge assumptions, rigor, thoroughness and independence in proportion to the importance of the decision.

Does Standard V(A) cover quantitative models?

Yes. You should understand a model's inputs, assumptions and limitations, including how it might behave in stressed markets. You need not build it yourself, but you cannot treat it as a black box.

Who is responsible if third-party research turns out to be wrong?

You are still accountable for the recommendations and actions you take. Relying on an outside source does not transfer your duty of diligence.