Level III Core · Guidance for Standard V: Investment Analysis, Recommendations, and Actions

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

Updated 8 October 2026 · Fact-checked

Under Standard V(A), you may rely on research from outside providers or other analysts in your firm, but only after due diligence. Check the assumptions, the methods, the rigor of the analysis and the independence of the source. Reliance without that check is a violation. Your own judgment stays your responsibility.

Understand Using Secondary and Third-Party Research

Standard V(A) requires you to exercise diligence, independence and thoroughness when you analyze investments, make recommendations or take action. You must also have a reasonable and adequate basis for what you do, supported by appropriate research and investigation. Using someone else's work does not remove that duty.

Secondary research is research produced by someone else. Third-party research comes from outside the firm, such as a broker report, a vendor model or a rating service. Research from other analysts inside your firm is also secondary for you. You can use any of it. The question is whether you checked it first.

The due diligence is about quality, not about redoing the work. You ask: Are the assumptions reasonable and stated? Is the method sound and applied rigorously? Is the data reliable and current? Is the provider independent, or does it have a conflict, such as a link to the issuer? Does the conclusion actually follow from the evidence?

The depth of review depends on the situation. A well-known provider with a long record may need a lighter check, but you should still review its process from time to time. A new or unfamiliar source needs a closer look. If you find the work flawed, you should stop relying on it. Where a firm uses a quantitative model or a rating service, you should understand its inputs, limits and what it cannot capture. Periodic review matters because quality can change.

For the firm, a good practice is to have a policy for selecting and monitoring outside providers, so each analyst does not rely on blind trust. A supervisor or firm may rely on a review process if it is reasonable. An individual who knows the work is poor cannot hide behind it.

Key rules to remember

Core rule of Standard V(A): Reliance on secondary or third-party research is allowed only after due diligence on its quality; Using it is fine. Using it unchecked is the violation.
Due diligence checklist: Assumptions + Methods and rigor + Data quality + Independence + Conclusion supported by evidence; Use this list to judge any source in a case.
Ongoing duty: Select with care, then review the provider periodically; A one-time check at selection is not enough if quality may change.
Responsibility: Your recommendation is your responsibility, whatever the source; Citing the provider does not remove your duty.

How to solve Using Secondary and Third-Party Research questions

Use this order for any Standard V(A) question about outside or internal research.

1Identify the source: third-party, vendor model, rating service or another analyst in the firm.
2Identify what the member did: relied fully, checked, or ignored a known problem.
3Test the work against the checklist: assumptions, method, data, independence, support for the conclusion.
4Note any red flag the member knew about, such as a conflict, a stale model or odd assumptions.
5Decide whether the member did reasonable due diligence for this source and this use.
6State the verdict: violation or not, naming Standard V(A).
7Give the corrective action: review the work, test the model, change the provider, or stop relying on it.

Quickest way: Ask: did the member check it?

When to use it: Item sets with short vignettes where a member uses outside research or a model.

Find the sentence where the member uses the research.
Look for the word that shows a check, such as reviewed, tested or compared.
If there is no check and the source is untested, lean to violation.
If the member checked and the source is reasonable, lean to no violation.
Confirm that no known red flag was ignored.

Common mistakes in Using Secondary and Third-Party Research

Thinking any outside research is forbidden or must be redone.
The word diligence sounds like full re-analysis.
Fix: Using it is allowed. You only need a reasonable check of quality and assumptions.
Assuming a big or well-known provider needs no review.
Reputation feels like proof.
Fix: A good name lowers the depth of review but does not remove it. Periodic checks still apply.
Treating research from a colleague in the same firm as exempt.
Students think internal work is already approved.
Fix: Other analysts' work is secondary research too. Check it before you rely on it.
Ignoring independence of the source.
Students focus on the numbers and skip conflicts.
Fix: Ask whether the provider has ties to the issuer or an interest in the outcome.
Saying the member is off the hook because the provider made the error.
Blame shifts easily to the author.
Fix: The member who uses the research owns the recommendation and its basis.
Continuing to rely on research after finding a flaw.
Switching feels costly and time-consuming.
Fix: Once a material flaw is known, stop relying on that work or correct it.

Worked examples

Example 1

A portfolio manager buys a stock because a brokerage report rates it a buy. She has used the broker for years and has never read its methodology or checked its assumptions. Under Standard V(A), did she act correctly?

Show the solution

The report is third-party research, so reliance is allowed in principle.
She did not review the broker's assumptions or method.
Long use of a source does not replace due diligence, and she has no record of periodic review.
So she lacks a documented reasonable basis for relying on it.

Answer: No. She violated Standard V(A) by relying on the report without checking its quality, assumptions and independence. She should review the broker's method and assumptions and review the source periodically.

Example 2

An analyst plans to use a vendor quantitative model to screen stocks. Before use, he reads the documentation, tests the model on past data, and finds it relies on an input the vendor no longer updates. He keeps using the model without change because the output is convenient. Is this consistent with Standard V(A)?

Show the solution

A vendor model is third-party research, and using it is allowed.
He did good due diligence by reading the documentation and testing it.
The test revealed a material problem: a stale input.
Continuing to use the model without correcting that flaw means he relies on work he knows is weak.
His diligence is undone by ignoring the result of his own check.

Answer: No. The checking was appropriate, but using the model after finding the stale input violates Standard V(A). He should fix or replace the input, adjust for the limitation, or stop using the model.

Exam tips

Look for the verb of checking: reviewed, tested, compared. Its absence usually signals a violation.
Expect a trap where the provider is famous or long used. Reputation alone is not due diligence.
In essay answers, name the Standard, then give the specific failed check, such as independence or stale assumptions.
Quantitative models and rating services are tested through the same logic: understand inputs and limits before relying.
Recommend a corrective action in few words: review, test, monitor, or stop relying.

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

Can I use a broker's research report in my recommendation?

Yes, under Standard V(A) you may use it. You must first judge its quality, assumptions and independence. You remain responsible for the recommendation.

Do I need to check research from another analyst in my own firm?

Yes. Internal research is secondary research. You should review it for reasonableness before relying on it, though the depth can depend on the analyst's record.

How does Standard V(A) apply to rating services and quantitative models?

You should understand how they work, their inputs and their limits. Check that they suit your use. Review them periodically since quality can change.

What if I find a problem in the research after I used it?

Stop relying on the flawed work and correct any action or recommendation that depended on it. Continuing to use work you know is flawed would breach the Standard.