Level III Core · Code of Ethics and Standards of Professional Conduct

Investment Analysis, Recommendations and Actions (Standard V)

Updated 8 October 2026 · Fact-checked

Standard V has three parts. V(A) requires diligence, independence and a reasonable basis for any recommendation or action. V(B) requires you to tell clients the process, factors and limits of your analysis. V(C) requires you to keep records that support your work. To solve questions, find the part breached, then state the fix.

Understand Investment Analysis, Recommendations and Actions (Standard V)

Standard V covers the quality of your work. It asks three questions. Did you do enough work before acting? Did you tell clients what they need to know? Can you prove it later?

V(A) Diligence and Reasonable Basis. You must exercise diligence, independence and thoroughness when analyzing investments, making recommendations and taking investment actions. You must have a reasonable and adequate basis for each one, supported by appropriate research and investigation. The level of work depends on the situation. A simple, well-known security needs less work than a complex or unfamiliar product. Relying on third-party or group research is allowed only if you have made reasonable efforts to confirm it is sound. In group work, a member who believes the research lacks a reasonable and adequate basis and cannot support it should dissociate from the report, which means asking to have their name removed. A member who believes the group view is reasonable may still support it, even without agreeing on every point.

V(B) Communication with Clients and Prospective Clients. You must disclose to clients and prospects the basic format and general principles of your investment process, and promptly tell them of any material change to it. You must consider the factors that matter to their decisions and communicate them. You must separate fact from opinion in your reports. Communicate the limitations of your analysis and the risks, including what a model or forecast can and cannot show. You should state the significant limitations of the process.

V(C) Record Retention. You must develop and maintain records that support your investment analysis, recommendations, actions and other investment-related communications with clients and prospects. Records are normally the property of the firm. Follow the applicable law or regulation if it sets a retention period. If there is no requirement, the Standards recommend keeping records for at least seven years. A longer legal period always overrides the recommendation. Records can be kept in electronic form. If you leave a firm, you cannot take the records with you without the firm's permission.

On the exam, these standards usually appear inside a short case. You must spot which part was breached and give the corrective action in as few words as possible.

Key rules to remember

Standard V(A): Diligence + independence + thoroughness → reasonable and adequate basis, supported by appropriate research; Applies to analysis, recommendations and actions. The depth of research scales with the complexity of the investment.
Standard V(B): Disclose process + communicate key factors + separate fact from opinion + state limitations; Applies to clients and prospective clients. Tell them promptly about material changes to the process.
Standard V(C): Local law period if one applies; otherwise keep records at least 7 years (recommended); Follow the applicable law or regulation if it sets a period. If there is no requirement, keep records at least seven years. Records belong to the firm unless permission is given.
Third-party research: Use only after reasonable inquiry into its soundness; Check assumptions, methods and the provider's diligence. Do not rely blindly on a reputed source.
Group research: Reasonable agreement → may support. Cannot support → ask to be dissociated; A member need not agree on every point but must believe the view has a reasonable basis.

How to solve Investment Analysis, Recommendations and Actions (Standard V) questions

Use this order for any Standard V question in an item set or essay. It keeps your answer short and tied to the facts.

1Read the question stem first and note the command word: identify, determine, justify, recommend.
2Find the action. Was it an analysis, a recommendation, a communication to clients or the keeping of records?
3Match the action to V(A), V(B) or V(C).
4Check the key condition: Was research adequate for the complexity? Was the process disclosed? Were facts and opinions separated? Were records kept?
5Decide if the member violated the Standard, complied, or needs to take a corrective step.
6State the answer in one clear sentence, then give one reason from the case facts.
7For an action question, name the specific fix: more research, disclose the limitation, notify clients of the change, retain the records.

Quickest way: Three-question screen

When to use it: Use it on item sets when you have about two to three minutes per question.

Ask: was there enough work behind the view? If no, it is V(A).
Ask: did the client get the process, the risks and the limits? If no, it is V(B).
Ask: is there a record supporting the work? If no, it is V(C).
Eliminate options that rely only on a famous source, a past track record or a firm's reputation.
Choose the option that adds research, disclosure or documentation without breaking another Standard.

Common mistakes in Investment Analysis, Recommendations and Actions (Standard V)

Treating a third-party report as a safe basis without checking it.
Candidates assume a reputed provider has done the diligence for them.
Fix: Remember that you may rely on outside research only after reasonable inquiry into how sound it is.
Saying a member must always leave a group whenever they disagree with any part of the view.
Candidates overstate the dissociation rule.
Fix: Dissociation applies when the member cannot accept that the group view has a reasonable basis. Disagreeing on minor points does not require it.
Mixing up V(B) with III(C) Suitability.
Both involve clients and recommendations.
Fix: Use V(B) for what you disclose about your process and the limits of analysis. Use III(C) for whether the investment fits the client's objectives and constraints.
Stating that records must be kept for exactly seven years in every case.
Candidates memorize the number without the condition.
Fix: State the rule in order: follow the applicable law or regulation if it sets a period; if there is no requirement, keep records at least seven years (recommended). A longer legal period overrides the recommendation.
Thinking a recommendation needs the same depth of research every time.
Candidates read thoroughness as a fixed checklist.
Fix: Scale the research to the complexity and risk of the product and the situation. A new complex product needs more.
Presenting an opinion or forecast as a fact in client reports.
Confident language feels more persuasive.
Fix: Label opinions and forecasts clearly and state their limits, as V(B) requires.

Worked examples

Example 1

An analyst at a global asset manager is asked to recommend a complex structured note she has never analyzed. The issuer's brochure states strong expected returns. She summarizes the brochure in her recommendation to clients and does not review the note's payoff terms. Which Standard is most likely violated, and what should she do?

Show the solution

Identify the action: she made a recommendation on a complex product.
Check the basis: she relied only on the issuer's brochure and did not examine the payoff terms.
Match to the Standard: this is a lack of reasonable and adequate basis, which falls under V(A).
Note the condition: complex, unfamiliar products need more diligence, not less.
State the fix: she should investigate the payoff structure, risks and issuer independently before recommending, or decline to recommend.

Answer: She violated Standard V(A) Diligence and Reasonable Basis. She must independently research the note's terms and risks before making any recommendation.

Example 2

A portfolio manager changes her process from a quantitative screen to a discretionary approach based on manager judgment. She does not tell clients because performance has been steady. She also keeps no notes from the change. Identify the violations and the corrective actions.

Show the solution

Identify the first action: a material change to the investment process.
Match to V(B): she must promptly tell clients and prospects about a material change to the process.
Identify the second action: no notes or documentation were kept for the change.
Match to V(C): she must maintain records that support her actions and communications.
State the actions: notify clients promptly and explain the change and its limits, and create and keep supporting records, for the period set by applicable law or, if there is no requirement, at least seven years (recommended).

Answer: She violated V(B) by not disclosing the material process change and V(C) by not keeping records. She should notify clients promptly and document and retain the supporting records.

Exam tips

Read for the trigger. Weak research points to V(A), missing disclosure points to V(B), missing documentation points to V(C).
In essays, answer with the Standard, then one fact from the case. Do not write a lecture on the Code.
For record retention, give the rule with its condition: follow applicable law if it sets a period; if there is no requirement, keep records at least seven years (recommended).
On group and third-party research, look for words like reasonable inquiry and reasonable basis. Blind reliance is the wrong choice.
If two options both look compliant, pick the one that adds action, such as research, disclosure or documentation.

Investment Analysis, Recommendations and Actions (Standard V) in other exams

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

CFA Level IInvestment Analysis, Recommendations and Actions: Standard V

Investment Analysis, Recommendations and Actions (Standard V): frequently asked questions

What does Standard V cover in the CFA Code and Standards?

Standard V covers Investment Analysis, Recommendations and Actions. It has three parts: V(A) Diligence and Reasonable Basis, V(B) Communication with Clients and Prospective Clients, and V(C) Record Retention.

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

Follow the applicable law or regulation if it sets a retention period. If there is no requirement, the Standards recommend keeping records for at least seven years. A longer legal period overrides the recommendation. Records are normally the firm's property.

Can I rely on research from another firm?

Yes, but only after you make reasonable efforts to confirm it is sound and has a reasonable basis. You remain responsible for your own recommendations.

What must I tell clients under V(B)?

Tell them the basic format and general principles of your investment process and promptly disclose material changes. Communicate the key factors in your analysis, separate fact from opinion, and state the limitations and risks.