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

A firm's senior managers conducted due diligence and selected a single data vendor for all portfolio managers. A portfolio manager uses the vendor's data and has no reason to question its validity or the firm's due diligence process. The portfolio manager's use of the data is most likely:

The use is acceptable. Standard V(A) guidance lets members rely on colleagues' determination of whether third-party information is sound and use it in good faith, unless they have reason to question its validity or the processes used. A personal audit or separate vendor choice is not required.

  1. Aa violation, because each manager must independently select a vendor
  2. Bacceptable, as the manager may use the information in good faithCorrect
  3. Ca violation, because the manager did not personally audit the vendor

Explanation

Members may rely on others in their firm to determine whether secondary or third-party research is sound and may use the information in good faith unless they have reason to question its validity or the processes used. Managers may have no choice of vendor when senior managers have done the diligence. No personal audit is required absent doubts.

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